Black Friday is Now! Don’t miss out on up to 60% OFF InvestingProCLAIM SALE

Market uncertainty looms as government shutdown threat and economic data releases approach

EditorRachael Rajan
Published 25/09/2023, 18:22
© Reuters.
COST
-
MU
-
NKE
-
IXIC
-
CCL
-
US2YT=X
-
US10YT=X
-
META
-
FL
-
MCGBc1
-

Investors are bracing for a challenging week ahead, given the recent retreat of the S&P 500 and Nasdaq Composite indices, potential government shutdown, key economic data releases, and the resumption of student loan repayments. The S&P 500 and Nasdaq Composite indices have retreated 6% and 8.5% respectively since their peak in July, with the former marking its worst performance since March last week.

The market's recent momentum has been largely driven by a select group of stocks, known as the "Magnificent 7." However, six out of these seven firms closed lower last week, with Meta, Facebook (NASDAQ:META)'s parent company, being the only exception to end at a higher value.

With the quarter drawing to a close, investors are anticipating potential challenges. Key economic data on housing and durable goods are set to be released this week, culminating in Friday's Personal Consumption Expenditures (PCE) report. Adding to the uncertainty is the looming threat of a government shutdown due to Congress's spending disagreements. If no consensus is reached by midnight on October 1st, numerous government employees could be furloughed. This potential shutdown could have an amplified impact on the economy due to the concurrent resumption of student loan repayments after a suspension period dating back to March 2020.

In response to this repayment resumption, Jefferies has downgraded Footlocker and Nike (NYSE:NKE) NKE. The firm predicts that consumers will have less discretionary income for boutique retailers.

Meanwhile, other stocks worth monitoring this week include Costco (NASDAQ:COST), Micron Technology (NASDAQ:MU) MU, Nike and Carnival (NYSE:CCL) Cruise Lines due to their upcoming earnings announcements. Newly public companies Instacart and Arm Holdings (NASDAQ:ARM) are also under scrutiny due to their underwhelming performance thus far, with shares trading at or below their IPO price.

In labor news, the United Auto Workers (UAW) strike continues, while the Writers Guild of America (WGA) has reached a preliminary agreement with top entertainment companies, potentially resolving the Hollywood dispute. However, this agreement does not alleviate the ongoing actors' strike.

Other key developments include rising interest rates on 2, 10 and 30-year bonds, which were all up last week and continue to climb. This has led to a steeper yield curve as longer-duration bond rates have increased more rapidly than short-term bonds. Crude oil prices are hovering just below $90 per barrel, while market volatility has risen by nearly 6% in premarket trading. This increase in volatility is not unexpected given the potential government shutdown, resumption of student loan repayments, and significant economic reports due this week.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers
© 2007-2024 - Fusion Media Limited. All Rights Reserved.