US stocks rose on Wednesday after the US government entered its first shutdown in seven years, putting hundreds of thousands of jobs and billions of dollars in output at risk. Meanwhile, key ADP jobs data showed private payrolls declined in September, widely missing estimates but helping to virtually cement bets on near-term rate cuts.
The S&P 500 (^GSPC) advanced 0.4% while the tech-heavy Nasdaq Composite (^IXIC) increased 0.5% after both began the session in the red. The Dow Jones Industrial Average (^DJI) was up 0.2%.
The major gauges turned positive after a sluggish morning and after stocks closed out their strongest third quarter since 2020 on Tuesday.
Wall Street largely shrugged off the expected economic impact of the government shutdown, at least for now. The longer it lasts, the greater the likely hit to growth, as the fallout reaches the businesses that rely on the federal government’s daily output.
The shutdown comes at a potentially perilous time for the economy, as the ADP’s monthly employment report — in especially high focus Wednesday — showed private payrolls unexpectedly declined last month. The private sector lost 32,000 jobs, the report said, missing expectations for a gain of over 50,000.
That report likely spurred further bets on coming interest rate cuts from the Federal Reserve, however. Around 99% of bets are on a cut later this month, and expectations for a December cut — now at about 87% — also saw a big jump.
In Washington, agencies will now implement contingency plans and send hundreds of thousands of workers home, amid warnings from President Trump that “a lot” of firings are to come.
Markets are watching the developments closely. Among the agencies whose work is set to be frozen is the Bureau of Labor Statistics, which gathers and reports economic data key to Federal Reserve policy decisions.
The BLS was set to release the September jobs report on Friday. But the nonfarm payrolls update is likely to be delayed, as BLS plans to “completely cease operations” with just one full-time employee kept in post.
The shutdown isn’t the only Trump policy push in focus on Wednesday, which marks the promised implementation of 100% tariffs on a range of pharmaceutical products and 25% duties on heavy-duty trucks.
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