S&P 500 Hits Record High, Crosses 6,700 For First Time As Investors Bet On Rate Cut, Brush Aside Government Shutdown

The S&P 500 index surged past the 6,700 level for the first time, reaching a record high, as investors brushed aside concerns that the U.S. government shutdown would impact equities.

At the time of writing, the S&P 500 index was hovering at 6,703, up by 0.23% for the day. Analysts at Fitch Ratings stated that the government shutdown “does not have near-term implications” for the United States' credit rating, according to a report by The Wall Street Journal.

Weak jobs data raised the hopes of an interest rate cut later this month, after a report by ADP showed that private payrolls declined 32,000 in September, while Wall Street expected an addition of 45,000 jobs during the month. According to the CME FedWatch tool, there is a 99% probability of a 25-basis-point rate cut in October, rising from 94.6% earlier on Wednesday.

“History suggests the U.S. government shutdown is unlikely to make much impact on financial markets even if it drags on for some time,” said Jonas Goltermann, deputy chief markets economist at Capital Economics, according to a Barron’s report.

Goltermann pointed out that the labor market weakness is the bigger issue in this case, not the government shutdown. He added that this could point to downside risks for equities, the U.S. dollar, and Treasury yields, according to the report.

Earlier on Wednesday, Vice President JD Vance addressed reporters at the White House and warned that federal employees could face layoffs if the shutdown continues. “We don’t necessarily want to do it, but we’re going to do what we have to keep the American people’s essential services continuing to run,” he told reporters. However, when asked why the Trump administration is expecting layoffs when past shutdowns have typically resulted in furloughs, Vance said no final decisions had been made yet.

White House press secretary Karoline Leavitt confirmed that layoffs could begin as soon as the next two days.

At the time of writing, the SPDR Dow Jones Industrial Average ETF Trust (DIA), which tracks the Dow Jones index, was up 0.15%. The SPDR S&P 500 ETF (SPY), which tracks the S&P 500 index, was up 0.39%, while the Invesco QQQ Trust (QQQ), which tracks the Nasdaq 100 index, was up 0.5%. Retail sentiment around the S&P 500 ETF on Stocktwits was in the ‘bearish’ territory.

The iShares 7-10 Year Treasury Bond ETF (IEF) was up 0.32% at the time of writing.

Also See: Gold Price Hits New Record As US Government Enters Shutdown

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