A government shutdown did not prevent equity markets from registering gains. For the week, the S&P 500 Index was +1.1%, the Dow Jones Industrials +1.1%, and the NASDAQ +1.2%. The Health Care, Utility, and Technology sectors led the S&P 500 Index for the week, while the Energy, Communication Services, and Consumer Discretionary sectors lagged. The 10-year U.S. Treasury note yield decreased to 4.123% at Friday’s close versus 4.181% the previous week.
The shutdown has caused a void on some economic data. The September Employment Situation report was not published on Friday. It is a light week for economic data this week, but lack of inflation reports for the Consumer Price Index and Producer Price Index the week of October 13th could hamper visibility into potential Federal Reserve policy decisions. The next Federal Open Market Committee (FOMC) policy meeting is scheduled for October 28th and 29th and will proceed since the Federal Reserve is self-funded. CME Fed funds futures are projecting 0.25% rate cuts at the October and December FOMC meetings, as well as a 0.25% cut at the March 2026 meeting.
Five companies in the S&P 500 Index are scheduled to report third quarter earnings results this week. Third quarter S&P 500 Index earnings growth is forecast at 8.0% with revenue growth of 6.3%. Full-year 2025 earnings are expected to grow by 10.9% with revenue growth of 6.1%.
In our Dissecting Headlines section, we look at the current state of the U.S. government shutdown.
Financial Market Update
Dissecting Headlines: Shutdown Update
The government shutdown has extended to Day 6. No progress was made over the weekend. The Democrats are holding their demand that there is an extension to Affordable Care Act subsidies and health care tax credits. The Republicans want the government re-opened before negotiating on health care or other policies.
The House of Representatives is currently in recess and not expected to return until October 14th. The House resolution for a 7-week continuing resolution was passed, and they are waiting on the Senate to act on it. The Senate is scheduled to reconvene today and vote on both Democrat and Republican proposed continuing resolutions.
Mid-October becomes a priority since active-duty military members could miss a paycheck if the government isn’t reopened. The White House also plans to start mass layoffs of government employees if the stalemate drags on.
To the average American, most of the shutdown impact will not be noticeable. Social Security, Medicare, and Medicaid are all funded, as will veterans benefits and healthcare. The Postal Service will continue as will air traffic control. The visible part of the shutdown, other than what we see on the news, is the closure of most monuments, museums and other national park services. Many administrative areas such as consumer protection, the EPA, federal permitting and licensing, and contracting and procurement activities are all delayed or on hold.
We are on Day 6 and the average historical shutdown has lasted just over a week. This one may last longer, but the mid-October military pay deadline and the House of Representatives coming back into session could serve as catalysts to break the standoff.