[New York Stock Exchange] Dow and S&P Hit Record Highs on First Day of U.S. Government Shutdown... Rate Cut Expectations Rise on Weak Jobs Data

U.S. Government Enters First Shutdown in Seven Years
Markets Bet on Swift Resolution
September Private Employment Falls by 32,000, Missing Expectations
Cooling Labor Market Fuels Expectations for October Rate Cut

On October 1 (local time), the three major indices of the New York Stock Exchange closed higher on the first day of the U.S. federal government shutdown (temporary work stoppage). As expectations grew that the shutdown would be resolved quickly, both the Dow Jones Industrial Average and the S&P 500 Index reached record highs. Additionally, increased anticipation of an interest rate cut, fueled by weak September employment data, supported the stock market.

On this day at the New York Stock Exchange, the blue-chip Dow Jones Industrial Average rose by 43.21 points (0.09%) from the previous trading day to close at 46,441.1. The large-cap S&P 500 Index climbed 22.74 points (0.34%) to 6,711.2, while the tech-heavy Nasdaq Index jumped 95.148 points (0.42%) to finish at 22,755.157.

Previously, the U.S. Congress failed to reach an agreement on the budget bill, leading the federal government to enter a shutdown at 12:01 a.m. on this day. This is the first shutdown in seven years since December 2018, during the first term of President Donald Trump. Until the last day of the 2025 fiscal year, both parties failed to pass either the 2026 fiscal year budget or a temporary budget in the Senate. The Democratic Party insisted that the extension of Obamacare subsidies must be included, while the Republican Party opposed this, considering it an insurance benefit for undocumented immigrants. With congressional approval falling through, a significant number of federal employees, except for essential personnel, were placed on unpaid leave.

Although the stock market was weak in early trading due to concerns over a prolonged shutdown, it reversed course and rose as expectations grew that the situation would be resolved quickly, as seen in past cases.

Louis Navellier, founder of Navellier & Associates, analyzed, "The market does not seem to be greatly concerned," and added, "Those hoping to buy at the bottom will have to wait. Momentum remains positive."

However, there is still caution, as risk factors such as slowing employment, concerns over rising prices, and high stock price levels are all present, making it difficult to downplay the risks of the shutdown. The White House and the Republican Party warned that massive layoffs of government employees would be inevitable due to the shutdown. On this day, the Senate put a temporary budget bill to a vote to resolve the shutdown, but it was rejected.

September employment data was weak. According to ADP, a private labor market research firm, the number of new private sector jobs in September decreased by 32,000 compared to the previous month. This is the largest decrease in two and a half years since March 2023 (when it fell by 53,000), and it sharply contrasts with market expectations of a 45,000 increase. As signs of a cooling labor market accumulate, expectations for an interest rate cut in October are rising even further. The interest rate futures market is currently pricing in a 99% chance that the Federal Reserve will cut the benchmark rate by 0.25 percentage points from the current 4-4.25% at its meeting on the 29th. This is up from 96.2% the previous day.

U.S. Treasury yields are also falling. The 10-year Treasury yield, a global bond market benchmark, fell by 4 basis points (1bp=0.01 percentage point) from the previous session to 4.1%, while the 2-year Treasury yield, which is sensitive to monetary policy, dropped by 6 basis points to 3.53%.

A more accurate picture of employment was expected to be provided by the September employment report from the Bureau of Labor Statistics (BLS) under the Department of Labor, which was scheduled for release on October 3. However, the release was canceled due to the shutdown. As a result, the Federal Reserve is now in a position where it must decide on the benchmark interest rate without key data.

The dollar, which had fallen due to the shutdown, pared its losses and is now flat. The dollar index, which measures the value of the dollar against the currencies of six major countries, is down 0.02% from the previous day at 97.43.

By stock, Nvidia rose 0.34%. Microsoft and Apple each gained 0.34% and 0.32%, respectively. Moderna jumped 6.85%, and Regeneron Pharmaceuticals soared 6.7%, highlighting the strength of biotech stocks. In contrast, bank stocks were weak, with JPMorgan falling 1.5%, and Citigroup and Wells Fargo dropping 2.75% and 3.52%, respectively.