Stocks Pressured as Government Shutdown Looms

The S&P 500 Index ($SPX) (SPY) today is down -0.17%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -0.02%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -0.30%.  December E-mini S&P futures (ESZ25) are down -0.15%, and December E-mini Nasdaq futures (NQZ25) are down -0.26%.

Stock indexes are under pressure today as the rising risk of a US government shutdown undermines market sentiment and prompts a risk-off in most asset markets.  Late Monday, Vice President Vance said President Trump's last-ditch meeting with congressional leaders ended without a deal.  Most federal operations would pause if lawmakers failed to reach an agreement before 11:59 p.m. tonight.  Friday's monthly payroll report would likely be delayed, as the Bureau of Labor Statistics would cease operations in the event of a shutdown.

The US Jul S&P composite-20 home price index showed home prices rose +1.82% y/y, above expectations of +1.55% y/y, but still the slowest pace of increase in two years.

The US Sep MNI Chicago PMI unexpectedly fell -0.9 to 40.6, weaker than expectations of an increase to 43.3.

Comments today from Fed Vice Chair Philip Jefferson hint at the possibility of stagflation and are negative for stocks, as he stated, "I see risks to employment as tilted to the downside and risks to inflation to the upside."

Comments today from Boston Fed President Susan Collins were slightly dovish when she said, "I continue to see a modestly restrictive policy stance as appropriate, as the Fed works to restore price stability while limiting the risks of further labor market weakening."  She added, "It may be appropriate to ease the policy rate a bit further this year, but the data will have to show that."

Late Monday, President Trump ordered 10% tariffs on imports of softwood timber and lumber, as well as 25% tariffs on kitchen cabinets, vanities, and upholstered wood products. The tariffs are set to take effect on October 14, with some increases scheduled to take effect on January 1.

The US government will shut down on Wednesday if lawmakers fail to pass a spending bill or continuing resolution (CR) by this evening.  The White House warned last Wednesday that a shutdown would trigger widespread dismissals of employees in government programs that don't align with President Trump's priorities.

Rising corporate earnings expectations are a bullish backdrop for stocks.  According to Bloomberg Intelligence, more than 22% of companies in the S&P 500 provided guidance for their Q3 earnings results that are expected to beat analysts' expectations, the highest in a year.  Also, S&P companies are expected to post +6.9% earnings growth in Q3, up from +6.7% as of the end of May. 

The markets are pricing in a 93% chance of a -25 bp rate cut at the next FOMC meeting on Oct 28-29. 

Market focus this week will be on any new trade or tariff news. Later today, the Aug JOLTS job openings are expected to increase by +19,000 to 7.200 million.  Also, the Conference Board's Sep consumer confidence index is expected to fall -1.4 to 96.0.  On Wednesday, the Sep ADP employment change is expected to increase by +51,000. Also, the Sep ISM manufacturing index is expected to rise by +0.3 to 49.0.  On Thursday, weekly initial unemployment claims are expected to increase by +7,000 to 225,000.  Also, Aug factory orders are expected to increase by +1.4% m/m.  On Friday, Sep nonfarm payrolls are expected to increase by +51,000, and the Sep unemployment rate is expected to remain unchanged at 4.3%. Also, Sep average hourly earnings are expected to increase by +0.3% m/m and +3.7% y/y.  Finally, the Sep ISM services index is expected to slip -0.2 to 51.8.

Overseas stock markets today are mixed.  The Euro Stoxx 50 is up +0.14%.  China's Shanghai Composite rose to a 1.5-week high and closed up +0.52%.  Japan's Nikkei Stock 225 fell to a 1-week low and closed down -0.25%.

Interest Rates

December 10-year T-notes (ZNZ5) today are up +4 ticks.  The 10-year T-note yield is down -1.0 bp to 4.129%.  T-notes are climbing today as weakness in stocks has sparked some safe-haven demand for government securities.  Also, a decline in inflation expectations is bullish for T-notes after the 10-year breakeven inflation rate fell to a 1.5-week low today at 2.354%.  In addition, month-end buying by bond dealers is supporting T-notes as the dealers purchase longer-term government debt securities to extend duration and balance their bond portfolios. 

European government bond yields are moving higher today.  The 10-year German bund yield recovered from a 1.5-week low of 2.693% and is up +0.8 bp at 2.715%.  The 10-year UK gilt yield is up +0.6 bp to 4.707%.

German Aug retail sales unexpectedly fell -0.2% m/m, weaker than expectations of 0.6% m/m.

The German Sep unemployment change increased by +14,000, showing a weaker labor market than expectations of +8,000.

German Sep CPI (EU harmonized) rose +2.4% y/y, stronger than expectations of +2.2% y/y and the strongest pace of increase in 7 months.

Swaps are discounting a 1% chance for a -25 bp rate cut by the ECB at its next policy meeting on October 30.

US Stock Movers

Energy producers and energy service providers are sliding today with the price of WTI crude oil down by more than -1% at a 1-week low.  Occidental Petroleum (OXY), Schlumberger (SLB), Halliburton (HAL), APA Corp (APA), ConocoPhillips (COP), and Devon Energy (DVN) are down more than -1%. 

Firefly Aerospace (FLY) is down more than -24% after saying that the first stage of its Alpha Flight 7 rocket experienced an event that resulted in "a loss of the stage." 

Paychex (PAYX) is down more than 6% to lead losers in the S&P 500 and Nasdaq 100, following disappointment that Q1 revenue came in as expected at $1.54 billion.

Vail Resorts (MTN) is down more than -4% after reporting a Q4 loss per share of -$5.08, wider than the consensus of -$4.73. 

TripAdvisor (TRIP) is down more than -3% after Mizuho Securities initiated coverage on the stock with a recommendation of underperform with a price target of $14. 

Spotify Technology SA (SPOT) is down more than -2% after announcing founder Daniel Ek will step down as CEO next year. 

Oklo (OKLO) is down more than -1% after Bank of America Global Research downgraded the stock to neutral from buy. 

NuScale Power Corp (SMR) is down more than -1% after Bank of America Global Research downgraded the stock to underperform from neutral with a price target of $34.

CoreWeave (CRWV) is up more than +12% after signing a deal to supply Meta Platforms with as much as $14.2 billion of computing power.

Semtech (SMTC) is up more than +7% after Oppenheimer Securities upgraded the stock to outperform from market perform with a price target of $81. 

Monolithic Power Systems (MPWR) is up more than +5% to lead gainers in the S&P 500 after KeyBanc Capital Markets raised its price target on the stock to $1,050 from $950. 

CRH Plc (CRH) is up more than +4% after forecasting full-year adjusted Ebitda of $7.5 billion-$7.7 billion, the midpoint above the consensus of $7.57 billion. 

EchoStar (SATS) is up more than +2% as Verizon Communications is said to be in discussions about purchasing some of the company's wireless spectrum.

Celsius Holdings (CELH) is up more than +2% after Morgan Stanley upgraded the stock to overweight from equal weight with a price target of $70. 

Freeport McMoRan (FCX) is up more than +1% after Bank of America Global Research upgraded the stock to buy from neutral with a price target of $42. 

Earnings Reports(9/30/2025)

Lamb Weston Holdings Inc (LW), NIKE Inc (NKE), Paychex Inc (PAYX), United Natural Foods Inc (UNFI).