Major United States benchmark averages closed at fresh record highs on Thursday (Friday AEST) as participants weighed the fallout of a government shutdown while keeping faith in the Federal Reserve’s expected policy easing.
The Dow Jones Industrial Average gained 78.6 points, or 0.2%, to finish at 46,519.7. The S&P 500 added 4.2 points, or 0.1%, to end at 6,715.4, while the Nasdaq Composite rose 88.9 points, or 0.4%, to 22,844.1.
Treasury Secretary Scott Bessent warned in an interview with CNBC that gross domestic product may “see a hit” due to the shutdown, now in its second day, heightening concerns about the broader economic outlook.
While markets have historically shown resilience during shutdowns, investors are paying closer attention this time given high market valuations, ongoing inflation pressures, and uncertainty over U.S. policy.
The shutdown began after Democrats and Republicans failed to strike a funding deal by Tuesday’s deadline.
Democrats pushed to tie the measure to an extension of health care tax credits, while President Donald Trump said the deadlock gave him an “unprecedented opportunity” to cut federal agencies.
Trump has also threatened permanent mass firings of federal workers, intensifying fears about a cooling labour market.
Investors are also bracing for an economic data blackout. The September nonfarm payrolls report, scheduled for release on Friday (Saturday AEST), will not be published as the Labor Department has halted nearly all operations during the shutdown.
Despite the political impasse, expectations for monetary easing supported sentiment. The CME Group FedWatch Tool showed a 97.3% probability of a 25 basis point cut at the Fed’s October meeting.
Weaker private payrolls in ADP’s Wednesday report added to the case for a cut as the central bank seeks to shield the economy from potential fallout.
On the bond markets, 10-year rates eased 0.4% to 4.085%, and 2-year rates were up 0.2% to 3.541%.
