On Wall Street, the response to the recent shutdown of the U.S. government has been surprisingly muted as stocks hover near record highs. As of midday Wednesday, the S&P 500 rose by 0.1%, while the Dow Jones Industrial Average inched up six points, maintaining its all-time high achieved the previous day. The Nasdaq composite also saw a 0.1% increase.
However, the bond market reflected a different story, with Treasury yields dropping following a disappointing economic report suggesting that hiring was much weaker than expected last month. According to a survey by ADP Research, non-government employers cut 32,000 more jobs than they added, with the Midwest region experiencing particularly harsh reductions. The report also downgraded previous employment figures from August, changing the narrative from a gain of 54,000 jobs to a loss of 3,000.
Typically, traders await a more comprehensive jobs report from the U.S. government for a clearer picture of the job market. However, the impending Labor Department report, scheduled for Friday, faces the possibility of delays due to the ongoing government shutdown, leaving analysts in uncertainty.
Carl Weinberg, chief economist at High Frequency Economics, noted that regardless of the accuracy of the ADP report, “people in the markets believe that it signals something,” cautioning that the headlines were not favorable. Market observers are hoping for a gradual slowdown in the job market that might persuade the Federal Reserve to continue cutting interest rates, without plunging the economy into recession. This delicate balance is increasingly difficult to gauge, especially as critical economic data continues to be stalled.
In the context of past government shutdowns, which often saw the stock market and economy weathering the storm, analysts are wary this time around. The shutdown raises new concerns about potential large-scale federal worker layoffs initiated by the administration.
In individual stock movements, Peloton Interactive saw a significant drop of 9.3%, receiving a tepid reaction to its introduction of an AI and computer vision system, along with new equipment aimed at cross-training. Corteva’s shares fell by 8% after the company’s announcement to split into two distinct entities, each with its own stock focus. The first will retain the seed business, while the other concentrates on crop protection. Cal-Maine Foods also saw a 3% decline, as its latest earnings report came in below analyst expectations.
On a brighter note, Nike experienced a surge of 4.7% after surpassing analysts’ profit expectations for the latest quarter, driven by robust apparel sales in North America. Meanwhile, Lithium Americas saw its stock rise dramatically by 26.1% after the U.S. government approved access to a previously announced $2.26 billion loan, with the Department of Energy taking an ownership stake in the Vancouver-based company that is collaborating with General Motors on a lithium project in Nevada.
International markets also reflected optimism, with European indexes rising after a mixed performance in Asian markets. Back in the bond market, the yield on the 10-year Treasury note fell to 4.12% from 4.16%, having reached as low as 4.09% earlier in the session. This decline is attributed to the weaker-than-expected ADP payroll report, which bolstered expectations for forthcoming Federal Reserve rate cuts. Contributing to the economic challenges, another report indicated that U.S. manufacturing also fell short of forecasts, with several manufacturers highlighting ongoing difficulties due to tariffs impacting their operations. One manufacturer lamented, “Steel tariffs are killing us.”
