Stock Market Update

[BRIEFING.COM] The S&P 500 (+0.1%), Nasdaq Composite (+0.2%), and DJIA (-0.1%) sit near their baselines after incurring broad-based opening losses following the start of a U.S. government shutdown. 

The early selling interest proved to be short-lived as the market has expected a shutdown for some time, though there are some concerns around the economic implications of a prolonged shutdown.

Additionally, the Labor Department's news and data blackout will prevent the release of key labor data later this week, which could complicate the market's expectations for further rate cuts.

For the time being, those expectations have been considerably boosted after the September ADP Payrolls report showed a loss of 32k private-sector jobs (Briefing.com consensus: +40k). According to the CME FedWatch tool, the probability of at least a 25-basis point rate cut at the October FOMC meeting now stands at 100% (from 96.7% yesterday) and the odds of another cut of at least 25 basis points in December rose to 87.8% (from 77.3% yesterday). 

Sector strength has been mixed today in response to the macro developments, with four S&P 500 sectors currently holding gains. 

The health care sector (+1.9%) leads the advance, supported by its countercyclical appeal amid labor market worries and strong gains in pharmaceutical stocks. Pfizer (PFE 27.11, +1.64, +6.42%) and peers continue to rally after yesterday's unveiling of TrumpRx, a direct-to-consumer platform aimed at lowering drug costs. As part of the initiative, Pfizer agreed to cut Medicaid prices and invest $70 billion in U.S. R&D in exchange for a three-year tariff reprieve.

Elsewhere, the utilities sector (+0.8%) also benefits from its defensive appeal, the consumer discretionary sector (+0.5%) trades higher on the heels of NIKE's (NKE 73.24, +3.51, +5.03%) earnings, and the information technology sector (+0.5%) is supported by strength in its chipmaker components. 

As for today's top laggards, the materials sector (-1.3%) retreats after Corteva (CTVA 62.10, -5.52, -8.17%) announced it will separate into two distinct companies, and the communication services sector (-1.0%) faces weakness in all but two of its components.

So far, today's action reflects resilience in the face of macro uncertainty, with rate-cut optimism continuing to provide a tailwind for the market. The major averages showed little reaction after reports that the Senate failed to pass a continuing resolution, extending the government shutdown.

Reviewing today's data:

• Weekly MBA Mortgage Applications Index -12.7%; Prior 0.6%
• September ADP Employment Change -32K (Briefing.com consensus 40K); Prior was revised to -3K from 54K
• September S&P Global U.S. Manufacturing PMI - Final 52.0; Prior 52.0
• September ISM Manufacturing Index 49.1% vs Briefing.com consensus of 49.2%; Prior 48.7%
  • The key takeaway from the report is that the manufacturing sector remains in a state of contraction, with new order activity under pressure from tariff costs and uncertainty.