S&P500 Today: Health Stocks Dominate as Humana, Cigna Jump Over 5%

Dow Leads Rally to Record Highs as Traders Discount Shutdown and Bet on Fed Cut

U.S. stocks climbed to fresh all-time highs on Friday, with the Dow Jones Industrial Average surging 519 points, or 1.1%, as investors looked past the ongoing federal government shutdown and instead focused on soft economic data and increased expectations for a Federal Reserve rate cut later this month. The S&P 500 rose 0.5%, while the Nasdaq gained 0.3%. Small caps outperformed, with the Russell 2000 jumping 1.5%, pushing its year-to-date gain near 12%.

Despite political gridlock in Washington, traders were undeterred. The shutdown has paused federal economic data releases, including the key nonfarm payrolls report, reducing near-term pressure on equities and giving the Fed less to work with at its October meeting.

According to the CME FedWatch Tool, markets are increasingly pricing in a quarter-point rate cut, helping to support equities, especially rate-sensitive sectors and growth stocks.

How Is the Federal Reserve’s Next Move Shaping Market Sentiment?

With official labor data unavailable, markets turned to private-sector signals that suggest a weakening jobs market. ADP’s payrolls report posted its sharpest drop since March 2023, and ISM services data also fell below expectations. The services PMI came in at a flat 50.0%, marking the weakest print since the early months of the pandemic. Business activity dropped into contraction at 49.9, while employment held in negative territory at 47.2.

Jennifer Timmerman of Wells Fargo Investment Institute said the softer data supports another Fed rate cut, calling it a key factor behind the latest rally. The 10-year Treasury yield eased to 4.11%, further lifting equities.

Which Sectors and Stocks Are Driving the Gains?

Health care led the S&P 500 sectors with a 1.47% gain, followed by utilities (+1.97%) and financials (+1.01%). Technology rose 0.33%, continuing to benefit from AI momentum, while consumer discretionary lagged, dipping 0.38%.

Top-performing stocks included Humana (+8.2%), Cigna (+5.7%), and Zebra Technologies (+4.7%). On the downside, casino operators slumped, with Las Vegas Sands and Wynn Resorts falling over 5%, and Palantir slipped 4.4%.

Will Rising Bullish Sentiment Among Retail Traders Hold?

Bullish sentiment among retail investors hit a three-month high, with 42.9% of respondents to the latest AAII survey expecting gains in the short term. While often viewed as a contrarian indicator, this uptick suggests growing confidence in the rally, though some analysts warn it could also signal a near-term saturation in buying interest.

Market Outlook: Is the Rally Sustainable Without Hard Economic Data?

With the shutdown continuing to limit economic visibility, markets will remain focused on substitute indicators and Fed commentary.

Traders expect the October FOMC meeting to bring a rate cut, but weak service-sector data and political uncertainty could limit further upside.

A sustained rally may hinge on earnings season and any resolution in Washington that restores the flow of economic data and boosts business confidence.

More Information in our Economic Calendar.