Stock Market Update

[BRIEFING.COM] After some early shakiness, the stock market proved to be largely unaffected by the ongoing government shutdown, with today's gains sending the S&P 500 (+0.3%) to new record highs (and past the 6,700 mark), while the DJIA (+0.1%) notched a record closing high, and the Nasdaq Composite (+0.5%) led the cohort. 

Investors steadily bought back the broad-based opening retreat, unfazed by the Senate failing to pass a continuing resolution to fund the government early this afternoon. The senate will leave tomorrow for the Yom Kippur holiday, which means the next votes on a resolution will be Friday and over the weekend. 

While today's resilience suggests the ongoing shutdown will have little effect on the stock market, it will delay the release of the Employment Situation Report, which was set to be released on Friday. Some analysts have expressed concerns that this could murky the market's expectations of further rate cuts from the Fed this year, though today's data reinforced a dovish tone ahead of the blackout.

The September ADP Payrolls report showed a decline of 32k private-sector jobs (Briefing.com consensus: 40k). In response, the CME FedWatch tool now prices a 100% chance of at least a 25-basis-point cut at the October FOMC meeting (up from 96.7% yesterday) and an 87.8% chance of another cut in December (up from 77.3% yesterday).

Stocks steadily traded higher throughout the day, with advancers outpacing decliners by a roughly 8-to-5 ratio on the NYSE and a roughly 4-to-3 ratio on the Nasdaq.

Only four S&P 500 sectors closed with gains, though they were substantial enough to lift the major averages. 

The health care sector (+3.0%) saw another day of impressive gains following yesterday's headline catalyst. Pfizer (PFE 27.23, +1.76, +6.89%) and peers continued to rise after yesterday's announcement of TrumpRx, a government-run platform to lower drug costs. Under the initiative, Pfizer will reduce Medicaid prices and invest $70 billion in U.S. R&D in exchange for a three-year tariff reprieve. 

Eli Lilly (LLY 825.71, +62.71, +8.22%), Thermo Fisher (TMO 531.07, +46.05, +9.49%), and Biogen (BIIB 154.22, +14.14, +10.09%) were just a few of several stocks in the sector to close with gains approaching double digits. 

The information technology sector (+0.7%) also captured a nice gain as strength in its chipmaker components saw the PHLX Semiconductor Index advance 2.1%. 

The consumer discretionary sector (+0.7%) closed similarly, supported by Tesla's (TSLA 459.41, +14.69, +3.30%) rise ahead of what is expected to be an impressive Q3 delivery report tomorrow and Nike's (NKE 74.24, +4.50, +6.46%) strength following its earnings report.

Today's biggest decliners included the materials sector (-1.2%), weighed down by Corteva (CTVA 61.47, -6.16, -9.11%) announcing a planned split into two companies, while the financials sector (-0.9%) saw weakness in its major banking names, and the communication services sector (-0.8%) slipped as most of its components traded lower.

Outside of the S&P 500, smaller cap indices such as the Russell 2000 (+0.2%) and S&P Mid Cap 400 (+0.3%) captured gains similar to that of their larger-cap peers. 

U.S. Treasuries rallied on Wednesday with leadership from the front end after today's weak ADP Employment Change report for September invited more questions about the present state of the labor market. The 2-year note yield settled down six basis points to 3.54%, and the 10-year note yield settled down four basis points to 4.11%.

• Nasdaq Composite: +17.8% YTD
• S&P 500: +14.1% YTD
• Russell 2000: +9.7% YTD
• DJIA: +9.2% YTD
• S&P Mid Cap 400: +4.9% YTD

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.