NASDAQ 100, Dow Jones, S&P 500 News: Markets Exhale as Government Shutdown Averted

Highlights

• U.S. government shutdown is narrowly averted by legislative action.
• Senate’s stopgap measure extends government funding for 45 days, offering temporary market relief.
• Lingering questions over government spending and geopolitical tensions limit futures gains.
• Market sentiment veers cautiously bullish, contingent on incoming economic indicators.

Government Shutdown Averted: What It Means for the Markets

The major US stock futures markets breathed a sigh of relief on Monday as U.S. lawmakers narrowly avoided a government shutdown. Just hours before the midnight deadline, the Senate passed a continuing resolution, which was swiftly signed into law by President Biden. This move keeps the government funded for an additional 45 days, buying legislators more time to hash out a more comprehensive funding plan.

At 09:00 GMT, the blue chip Dow futures are trading 33881.00, up 156.00 or +0.46%. The benchmark S&P 500 Index is at 4350.25, up 24.75 or +0.57% and the tech-weighted Nasdaq 100 futures are trading 14982.50, up 116.00 or +0.78%.

Recent Uncertainties

Investors have been on edge, navigating a choppy September that flirted with the prospects of a government shutdown. This added anxiety exacerbated an already tense environment, marked by the highest interest rates in 15 years and worries about slowing economic growth. The stopgap agreement resulted in an immediate unwinding of shutdown-driven selling, injecting a much-needed boost into the markets.

Short-term Impact

However, futures gains were capped by lingering concerns about the government’s spending levels, border issues, and geopolitical tensions involving Ukraine. Traders speculate that Congress may only be kicking the can down the road, potentially setting the stage for another showdown that could influence the 2024 elections.

Interest Rate and Economic Data

In a closely related subplot, U.S. Treasury yields climbed higher in the overnight session on Monday. The 10-year yield reached 4.6186%, not far off from its 15-year peak of 4.688% achieved last week.

This movement came on the heels of Friday’s personal consumption expenditures price index, which suggested that inflation might be less severe than initially thought, albeit persistent. Upcoming economic data releases, such as nonfarm payrolls and unemployment figures due later this week, will offer additional cues on the Federal Reserve’s next moves.

Outlook: Cautiously Bullish

Although September witnessed poor performance across major indexes like the S&P 500 and Nasdaq Composite, the markets are still up year-to-date, thanks to factors like potential Fed rate cuts and robust demand for AI stocks. For the short term, the market sentiment seems cautiously bullish, contingent upon forthcoming economic indicators and any potential political disruptions.

Overall, investors can take some comfort in the temporary resolution, but the undercurrent of uncertainty suggests keeping an eye on both Capitol Hill and key economic data.

Technical Analysis

Friday’s close of the S&P 500 at 4288.04 is notably above its 200-Day moving average of 4199.46, signaling a generally bullish long-term trend. However, its position below the 50-Day moving average of 4452.70 indicates a shorter-term bearish sentiment.

The 14-Day RSI at 34.02 suggests the market is oversold, possibly pointing to an upcoming bullish reversal.

Although the index is trading above its main and minor support levels, it remains below minor resistance. Additionally, the index is attempting to build support along an uptrend line at 4292.00.

Considering these factors, the market sentiment appears mixed with a bearish tilt in the short term, but the oversold RSI condition could trigger a bullish reversal.