Potential Federal Government Shutdown Weighs on Investor Sentiment
Focus on Manufacturing PMI on the 23rd and PCE Inflation Data on the 26th
The three major indexes on the New York Stock Exchange showed mixed movements on September 22 (local time). After hitting record highs last week, the market appears to be taking a breather. Additionally, concerns over a potential federal government shutdown are weighing on investor sentiment.
As of 10:05 a.m. on the New York Stock Exchange, the Dow Jones Industrial Average, which focuses on blue-chip stocks, was down 112.31 points (0.24%) from the previous trading day at 46,202.96. The S&P 500 Index, which tracks large-cap stocks, was down 2.31 points (0.03%) at 6,662.05, while the tech-heavy Nasdaq Index was up 24.838 points (0.11%) at 22,656.314.
After a rally last week triggered by the Federal Reserve’s first interest rate cut of the year, the market is pausing to search for new catalysts to drive further gains. Concerns have also grown as the U.S. Senate rejected a stopgap budget bill that had passed the House of Representatives. If the budget is not approved by September 30, a federal government shutdown will be unavoidable starting October 1. Senate Majority Leader Chuck Schumer stated that Democratic cooperation is necessary to pass the stopgap bill, urging President Donald Trump to meet with Democrats and reach a deal.
The market’s attention is focused on economic indicators scheduled for release this week. With the Federal Reserve having cut rates on September 17 due to concerns over a slowdown in the labor market, inflation and growth-related indicators are expected this week. On September 23, the S&P Global Manufacturing Purchasing Managers’ Index (PMI) for September, which gauges manufacturing activity, and a public speech by Federal Reserve Chair Jerome Powell are scheduled. On September 25, the final figure for U.S. real gross domestic product (GDP) for the second quarter will be released, and on September 26, the core personal consumption expenditures (PCE) price index for August, the Fed’s preferred inflation indicator, will be announced. The market expects the PCE price index for last month to rise by 0.2% from the previous month, lower than July’s 0.3% increase.
Emmanuel Cau, Head of European Equity Strategy at Barclays, analyzed, “Stocks are near record highs and the rate market is still pricing in five more rate cuts next year. Further stock gains will need to be supported by robust macroeconomic data going forward, rather than dovish monetary policy.”
Joachim Klement, strategist at Panmure Liberum, diagnosed, “This week is the quietest in terms of macroeconomic events so far this month. With the earnings season over, the market is likely to move based on rumors and investor sentiment.”
U.S. Treasury yields are steady. The 10-year Treasury yield, a global benchmark, stands at 4.13%, while the 2-year yield, which is sensitive to monetary policy, is at 3.57%, both hovering around previous session levels.
By stock, Metsera, a developer of obesity treatments, soared 62.4% on news that global pharmaceutical company Pfizer will acquire it for $4.9 billion. Pfizer shares are up 2.89%. Oracle is up 0.14% after reports that it will handle data and privacy management for TikTok’s U.S. operations, following the sale of the business by China’s ByteDance to a U.S. company. Tesla has jumped 3.87%, while Nvidia is down 0.7%.
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