US Stock Rally Decelerates on Shutdown Worries: Markets Wrap

(Bloomberg) — A rally in US stocks is losing steam on Monday on concerns about a looming US government shutdown possibly delaying the release of key labor-market data that could provide clues about how fast the Federal Reserve will cut interest rates. Treasury yields declined across the curve.

The S&P 500 was 0.2% higher as of 2:06 p.m. New York time. The Nasdaq 100 rose 0.5% after climbing nearly 1%. The Bloomberg dollar index pared earlier losses after pending home sales for August jumped to the highest level in five months. The US Treasury 10-year yield fell to 4.14%. Gold, a safe-haven asset hit a record.

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Investors are worried that the threat of a US government shutdown could hinder some crucial data releases that they require to discern how the US economy is doing. That includes Friday’s nonfarm payrolls report, which would offer details on how the labor market is holding up and help the Fed decide how many more times to cut rates this year.

“Given the importance of the job market to the Fed’s rate-cutting decisions, risk that the September unemployment report could be delayed could add to the market’s anxiety over the direction of policy,” said Kathy Jones, chief fixed income strategist at Schwab.

What Bloomberg Strategists say…

“A record run in stocks has proven formidable against the scare of shutdowns, which explains why investors are hardly spooked by the latest threat of government closure. In past instances of either an actual or threatened shutdown, the S&P 500 did get hit momentarily. Yet any impact tends to be short-lived and has hardly stopped the index from eventually reaching all-time highs.”

—Kristine Aquino, Managing Editor, Markets Live

For the full analysis, click here.

Uncertainty around trade policies also persists as Trump said he would levy new tariffs to boost the domestic film and furniture industries through a pair of sweeping — yet confusing — plans. Emma Wall, chief investment strategist at Hargreaves Lansdown, wrote that investors should be mindful that the inflationary impact of tariffs is not properly seen in numbers just yet.

“Further tax hikes — such as the 100% pharmaceuticals levy announced last week — are likely to add pricing pressures,” she said.

Separately, economists rejected Federal Reserve Governor Stephen Miran’s first major policy speech, in which he argued that the Trump administration’s policies have significantly lowered the level of interest rates needed to guard against inflation. Miran still doubled down on his stance, saying the Fed risks damaging the economy by not moving rapidly to cut interest rates.

US INSIGHT: No, Dr. Miran, R* Isn’t Down, Crisis Cuts Not Needed

Apart from Friday’s jobs report, there’s also the JOLTs report releasing on Tuesday that will offer a picture on job openings while Wednesday’s data will shed light on company hiring. Strategists said the recent negative revisions and downtrend in jobs numbers will raise the stakes for Friday’s release.

“We could be set for some notable volatility around these prints going forward as the breakeven payroll rate now seems to be around or under 50,000 a month,” wrote Jim Reid, global head of macro research and thematic strategy at Deutsche Bank AG. “We are not really conditioned to negative prints being within that margin of error, so reactions to such prints may be not rational.”

Looming Shutdown

Top congressional leaders will meet with President Donald Trump at the White House a day before federal funding would expire if the two parties can’t agree on a short-term spending bill. The bill would only fund the government until mid-November and must pass before Oct. 1.

Ulrike Hoffmann-Burchardi, CIO Americas and Global Head of Equities, UBS Global Wealth Management, urges investors to look past shutdown fears and pay attention to other market drivers, such as the Fed’s path, strong corporate earnings and robust AI capex.

“We continue to prefer quality fixed income, particularly those with medium-term maturities, which we believe offers a compelling combination of income and resilience in the event of slower growth,” Hoffmann-Burchardi said. “Income replacement strategies, such as equity income or yield-generating structured strategies, may also help diversify portfolios.”

Valuations

Equities investors have recently been irked about valuations being too high, prompting them to ditch stocks for a few sessions last week. But a growing number of Wall Street analysts are now advising that it may be time to forget what you thought you knew about price-to-earnings ratios, as the average multiple has steadily jumped higher over the course of decades.

“There’s something weird going on with valuations from what they used to be — that is, there’s an upward trend in the valuation range,” said Jim Paulsen, who now writes a Substack newsletter called Paulsen Perspectives.

In company news, Electronic Arts Inc. agreed to sell itself to Saudi Arabia’s sovereign wealth fund and a pair of private equity firms in a deal that values the company at about $55 billion, marking the largest leveraged buyout on record. Huawei Technologies Co. is preparing to sharply ramp up production of its most advanced artificial intelligence chips over the next year.

Some of the main moves in markets:

Stocks

The S&P 500 rose 0.2% as of 2:06 p.m. New York time The Nasdaq 100 rose 0.5% The Dow Jones Industrial Average was little changed The MSCI World Index rose 0.2% Currencies

The Bloomberg Dollar Spot Index fell 0.2% The euro rose 0.2% to $1.1723 The British pound rose 0.2% to $1.3427 The Japanese yen rose 0.6% to 148.57 per dollar Cryptocurrencies

Bitcoin rose 3% to $114,219.37 Ether rose 2.6% to $4,159.16 Bonds

The yield on 10-year Treasuries declined four basis points to 4.14% Germany’s 10-year yield declined four basis points to 2.71% Britain’s 10-year yield declined five basis points to 4.70% Commodities

West Texas Intermediate crude fell 4.1% to $63.03 a barrel Spot gold rose 1.8% to $3,828.17 an ounce This story was produced with the assistance of Bloomberg Automation.

–With assistance from Andre Janse van Vuuren, Eman Abouhassira, Isabelle Lee and Alexandra Semenova.

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