New York
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Market Reaction to Government Shutdown
Stocks were poised to open lower on Wednesday following the official shutdown of the US government, leaving Wall Street to evaluate the potential economic repercussions.
Futures Decline
Dow futures fell by 219 points, about 0.47%, while S&P 500 futures decreased by 0.5% and Nasdaq 100 futures dropped by 0.6%.
Shutdown Goes into Effect
The government formally shut down at midnight, marking the first such occurrence in seven years, as lawmakers could not reach an agreement on a funding bill.
Impact on Federal Workforce
This stalemate will likely result in many federal employees being furloughed, heightening concerns over the release of key government economic data.
Historical Outlook on Shutdowns
Historically, stock markets have shown resilience during government shutdowns. Since 1976, there have been 20 shutdowns, averaging eight days each. Adam Turnquist from LPL Financial notes that the S&P 500 typically gains 1.2% and 2.9% one and three months after each shutdown, respectively.
Investor Sentiment
Despite ongoing market strength, some investors voice concerns over unique risks related to the current shutdown, particularly regarding economic data availability, which could lead to market volatility if the shutdown lasts beyond expectations.
Focus on Market Drivers
Many analysts, including Ulrike Hoffmann-Burchardi from UBS Global Wealth Management, urge investors to prioritize ongoing factors such as strong corporate earnings and potential Federal Reserve rate cuts over shutdown fears. Meanwhile, gold and silver prices are rising, indicating a shift toward safer assets amid ongoing uncertainty.
