US stock indices grind higher
US stock indices were firmer across the board on Thursday. The Dow, S&P 500 and NASDAQ gained 0.2%, 0.1% and 0.4% respectively, with all three posting fresh closing highs. The small cap Russell 2000 outperformed, adding 0.7%, taking it back within sight of its own all-time high hit last week.
Source: TN Trader
Investors brushed aside concerns about the ongoing government shutdown, which has just entered its third day. Investors and traders alike also cast aside recent concerns over the possibility of poor returns on investment in artificial intelligence (AI). NVIDIA tacked on 0.9% to hit a fresh all-time high, taking the market capitalisation of the world’s most valuable company to $4.6 trillion.
Other chipmakers, including Intel and AMD, were also in demand, and the rally has continued this morning. Intel was up 1.6% in early trade on Friday, while the Taiwan Semiconductor Manufacturing Company jumped 2.3% to trade at a fresh all-time high.
Stock index futures were firmer across the board this morning, adding to yesterday’s record-breaking gains. It’s as if traders are relieved that the US government shutdown means that today’s scheduled Non-Farm Payroll release will no longer go ahead.
While this deprives the Federal Reserve of a key data point ahead of its October policy meeting, it also removes a potential downside catalyst for equities. The last two updates, for July and August, were dismal, with both coming in well below expectations, and as previous releases were revised down sharply.
President Trump reacted to July’s numbers by sacking the head of the Bureau of Labor Statistics, Erika McEntarfer. The Trump administration has just withdrawn its preferred candidate, EJ Antoni, due to mounting controversy and bipartisan criticism.
On Wednesday, the monthly ADP private payroll update came in well below expectations, confirming weakness across the labour market that had already been picked up by the last two Non-Farm Payroll releases. Investors saw this as increasing the likelihood that the US Federal Reserve will cut interest rates ahead of year-end.
The probabilities rose again yesterday with the CME’s FedWatch tool indicating a 98% probability of a 25-basis point cut at the end of this month, up from 88% last week, and an 88% probability of another 25 basis points in December, up from 65%. These numbers would suggest that investors aren’t factoring in the possibility that the loss of data could persuade the Fed to leave rates unchanged, given the lack of economic clarity.
The government shutdown, triggered by the failure of Congress to reach a funding deal, has already resulted in the furlough of around 750,000 federal workers, according to the Congressional Budget Office.
President Trump has warned of mass layoffs and described the standoff as an “opportunity” to cut federal agencies, while Democrats refuse to back down on extending health care tax credits for millions of American citizens. Meanwhile, Treasury Secretary Scott Bessent cautioned that the shutdown could deliver “a hit to GDP, a hit to growth and a hit to working America.”