Dow Hits Record as Government Shutdown Nears End

The Dow led markets higher, hitting record highs as optimism grew around the imminent resolution of the U.S. government shutdown. Investors welcomed lower Treasury yields and the prospect of resumed economic data releases, which are seen as critical in shaping the Fed’s next move. While the S&P 500 held steady and the Nasdaq lagged due to weakness in megacap tech, the broader market benefited from a shift back toward cyclicals and rate-sensitive sectors. Oil prices plunged, while gold rallied on lower yields and a softer dollar.

Key Headlines & Market Movers:

• Government Shutdown Nearing End, Market Looks Ahead: Markets responded favorably to signals that House lawmakers are close to ending the month-long shutdown. While the impact on economic growth is expected to be short-term, the key benefit is the return of vital economic data. The lack of reports on jobs and inflation has clouded the Fed’s December decision, but reopening the government should allow investors to recalibrate expectations in time. Historically, market performance improves after shutdowns, and the S&P 500 has already posted a gain since this one began in October.

Fed Rate Cut Bets Strengthen Amid Yield Drop: Treasury yields fell again, with the 10-year dropping to 4.07%, as traders priced in increased odds of a Fed rate cut next month. Analysts note that once delayed economic data becomes available, it could support a more dovish Fed stance, especially if labor and inflation figures soften. Rate-sensitive assets like equities and gold are already reflecting these expectations.

• Tech Megacaps Drag Despite Broader Equity Gains: While roughly 300 S&P 500 names advanced, weakness in the tech megacap complex, down over 1%, kept the overall index in check. This reflects growing investor caution around elevated valuations and earnings expectations, even for AI-related names. AMD stood out positively, however, projecting accelerating data center growth. The Magnificent 7 index fell, suggesting some profit-taking or valuation reset in the sector.

Crude Slides as Supply Concerns Resurface: WTI crude dropped over 4%, the steepest daily fall since June, amid renewed concerns about oversupply and weak demand outlooks. This comes despite OPEC efforts, with investors questioning the durability of price support as inventories climb. The decline weighed on energy stocks but added to disinflationary signals that could reinforce Fed dovishness.

S&P 500 Sector Performance

Looking Ahead

With the shutdown resolution in sight, focus shifts quickly to the data catch-up. Key figures for labor, inflation, and GDP, likely to be released in quick succession, will shape the Fed’s December policy call. Equity markets appear to be pricing in a soft landing and a dovish pivot, but the reintroduction of hard data could challenge that narrative if it surprises to the upside. Positioning may remain volatile as the fog lifts, with cyclicals and AI-linked infrastructure still drawing interest.

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