US markets fall after government shutdown: Funding lapses in Congress; key data may be delayed

US stock futures dropped on Wednesday after the federal government entered a shutdown at midnight. Lawmakers in Congress failed to pass a funding bill before the deadline. This is the first shutdown since 2018. Many federal workers will stay home without pay, and several government services and data reports may be delayed. Previous shutdowns have not had a major impact on stock markets, but some experts warn that this time could be different.

The United States government officially shut down at midnight on Wednesday. Congress was unable to pass a funding bill before the deadline. This has led to the first government shutdown in seven years. As a result, many federal employees will be placed on unpaid leave. Several government departments will stop working fully or operate with fewer staff. Some public services may be paused, and economic data reports such as employment and inflation numbers may be delayed.

US stock futures opened lower after the shutdown was confirmed. Dow Jones Industrial Average futures dropped by 219 points, or 0.47%. S&P 500 futures fell by 0.5%, and Nasdaq 100 futures went down by 0.6%. The fall came as investors reacted to the start of the shutdown and the uncertainty around how long it might last.

Adam Turnquist, chief technical strategist at LPL Financial, said past shutdowns have not caused major losses in the stock market. According to LPL Financial data, there have been 20 shutdowns since 1976. On average, they lasted about eight days. Turnquist said that in the one-month period after each shutdown ended, the S&P 500 rose by an average of 1.2%. After three months, the index went up by 2.9% on average. He added that some sectors, such as defense and life sciences, could face more pressure during shutdowns because they rely heavily on government contracts.

Jennifer Timmerman, investment strategy analyst at Wells Fargo Investment Institute, said the shutdown may have only a small effect on the overall economy. However, she noted that if government data is delayed, it could lead to more uncertainty in the market. These reports are used by the Federal Reserve to decide on changes to interest rates.

Keith Buchanan, senior portfolio manager at Globalt Investments, said the market may not be fully prepared for a longer or more serious shutdown. He said this could increase risks for investors in the coming weeks.

The stock market had a strong performance in September. The S&P 500 rose by 3.5%, its best September since 2010. On Tuesday, just before the shutdown began, the Dow Jones Industrial Average reached a record high. Eric Teal, chief investment officer at Comerica Wealth Management, said the shutdown is more of a political event than a financial one.

Gold and silver prices went up on Tuesday and continued to rise on Wednesday. José Torres, senior economist at Interactive Brokers, said the shutdown is pushing investors toward safe-haven assets like gold, as they look to reduce risk.

1. Why did the US government shut down?Congress did not pass a funding bill by the deadline, which led to a government shutdown.
2. How did the markets respond to the shutdown?Stock futures for the Dow, S&P 500, and Nasdaq all fell after the shutdown began.
3. What services are affected by the shutdown?Many federal workers are on unpaid leave. Some government services and regular economic data reports may be delayed.