Wall Street Hits New Records, Shrugs Off Shutdown Amid Heightened Rate Cut Bets

NEW YORK, NY – U.S. stock markets climbed to fresh record highs on Wednesday, largely unfazed by the federal government's first shutdown in seven years. Investors instead shifted their focus to weaker-than-expected jobs data, which significantly bolstered expectations for imminent interest rate reductions.

The S&P 500 record was notable, advancing 0.3% to close above 6,700 for the first time. The Dow Jones Industrial Average also saw a modest gain of nearly 0.1%, securing its second consecutive record close. Meanwhile, the technology-heavy Nasdaq Composite increased 0.4%, successfully erasing earlier session losses. These major gauges turned positive after a somewhat sluggish morning, following Tuesday's close which marked Wall Street's strongest third quarter since 2020.

Wall Street appeared to shrug off the anticipated government shutdown impact on the economy, at least for the short term. Economic analysts suggest that the longer the shutdown persists, the greater the potential hit to growth, as its fallout invariably reaches businesses reliant on federal government operations.

The timing of the shutdown could pose risks for the US economy. Of particular focus on Wednesday was the ADP's monthly employment report, which unexpectedly indicated a decline in private payrolls last month. The private sector reportedly shed 32,000 jobs, a stark contrast to expectations for a gain exceeding 50,000.

This soft jobs report likely fueled further speculation regarding upcoming Federal Reserve rate cuts. Market indicators showed approximately 99% of bets now favor a rate cut later this month. Expectations for a December cut also saw a significant jump, now sitting around 87%.

In Washington, federal agencies are now implementing contingency plans, sending hundreds of thousands of workers home. President Trump has issued warnings that "a lot" of firings could follow. Markets are closely monitoring these developments. A key concern is the potential freeze of operations at the Bureau of Labor Statistics (BLS), an agency critical for gathering and reporting economic data that directly influences Federal Reserve policy decisions.

The BLS had been scheduled to release the September jobs report on Friday. However, the nonfarm payrolls update is now likely to be delayed, as BLS plans call for a "complete cessation of operations," with only one full-time employee remaining in post.

Beyond the shutdown, another Trump administration policy move drew attention on Wednesday. The day marked the promised implementation of 100% tariffs on a range of pharmaceutical products and 25% duties on heavy-duty trucks. These new tariffs add another layer of policy development for investors to consider amidst the ongoing economic uncertainties.