Uncertainty about the economy due to the government shutdown and profit taking in the technology sector caused a decline in stocks last week. For the week, the S&P 500 Index was -1.6%, the Dow Jones Industrials -1.2%, and the NASDAQ -3.1%. The Energy, Health Care, and Real Estate sectors led the S&P 500 Index, while the Technology, Communication Services, and Consumer Discretionary sectors lagged. The 10-year U.S. Treasury note yield was 4.093% at Friday’s close, level with the previous week.
While we are now in the 41st day of the U.S. government shutdown, the U.S. Senate did clear a procedural hurdle on Sunday that could lead to the reopening of the government this week.
The lack of economic data due to the government shutdown could cause the Federal Reserve to be more cautious around monetary policy, but a reopening could get data flowing and bring greater clarity ahead of the December Federal Open Market Committee meeting. CME Fed funds futures are currently projecting a 0.25% cut to the Fed funds rate in December.
The earnings reporting season is in its final weeks with 91% of companies in the S&P 500 Index complete. This week has 11 companies in the S&P 500 Index scheduled to report results. Third quarter S&P 500 Index earnings growth is forecast at 13.1% with revenue growth of 8.3%. This is a large increase from the 8.0% earnings growth and 6.3% revenue growth for the quarter expected at the start of the earnings period last month. Full-year 2025 earnings are expected to grow by 11.6% with revenue growth of 6.8%.
In our Dissecting Headlines section, we look at the actions needed to get the U.S. government reopened.
Financial Market Update
Dissecting Headlines: Reopening the Government
The government shutdown has extended to Day 41 but may be close to ending. The Senate voted 60–40 on a measure to advance the House-passed funding bill to a vote. This clears a procedural hurdle and sets up the possibility for a vote this week to end the shutdown.
The bill provides a short-term continuing resolution to fund the government through January 30th. It provides full-year funding for military construction and veterans affairs, Congress, and the Department of Agriculture, which includes food assistance. Federal workers and military members will get guaranteed back pay and 4,000 federal employees who were laid off during the shutdown will be rehired. There is also a halt to any mass layoffs of federal workers until January 30th. There is no immediate extension of the Affordable Care Act subsidies, but the agreement calls for a stand-alone Senate vote in December on extending those subsidies before they expire on December 31st.
The Senate is scheduled to reconvene today to continue debate and move toward a final vote on the funding package. If the final bill in the Senate is identical to the House-passed version, the next step would be sending it directly to the President for signature. If the Senate amends the bill, it will have to return to the House for another vote.
Once a bill is passed and signed by the President, the process of funding and reopening can commence.