Stocks hit new record highs on Wednesday, seemingly unfazed by the U.S. government shutdown. However, bond yields sharply dropped after a disappointing ADP jobs report indicated unexpected job losses and weak manufacturing data, raising concerns about the economy's health and the Federal Reserve's potential interest rate decisions.
Major U.S. stock indexes continued their ascent on Wednesday, with the S&P 500, Dow Jones Industrial Average, and Nasdaq composite all closing at new record highs. This market optimism persisted despite the ongoing U.S. government shutdown. In contrast, the bond market saw significant movement, with Treasury yields falling after an ADP Research report revealed that employers outside the government cut 32,000 more jobs than they added last month, a performance much weaker than economists had predicted. The report also revised August's employment figures down to a loss of 3,000 jobs. This discouraging jobs data, combined with a separate report showing weaker-than-expected U.S. manufacturing activity, increased expectations for potential interest rate cuts by the Federal Reserve. However, the government shutdown is expected to delay the more comprehensive Labor Department jobs report, creating uncertainty about the true state of the job market and the broader economy. Analysts noted that while markets hope for a 'goldilocks' scenario—enough economic slowing to prompt Fed cuts but not enough to trigger a recession—the delayed data makes this balance harder to assess. On the corporate front, Nike rose 6.4% on strong earnings, and Lithium Americas jumped 23.3% after securing a U.S. government loan. Conversely, Peloton Interactive fell 3.7% after unveiling new equipment, Corteva sank 9.1% following a plan to split into two companies, and Cal-Maine Foods declined 1.2% due to disappointing earnings. Internationally, European indexes rose after a mixed performance in Asia. The yield on the 10-year Treasury dropped to 4.10% from 4.16%.
