The S&P 500 closed at a record high on Wednesday as traders were hopeful that a U.S. federal government shutdown would be brief and possibly have little impact on the economy.
The broad market index gained 0.34% to close at 6,711.20. Earlier, it had hit a new all-time intraday high. The Nasdaq Composite rose 0.42% to settle at 22,755.16, while the Dow Jones Industrial Average traded up 43.21 points, or 0.09%, to finish at 46,441.10.
It was a notable turnaround. At its low of the day, the S&P 500 was down 0.5%. The index's move higher was led by a boost in health-care stocks, with big gains in Regeneron Pharmaceuticals and Moderna. Markets are coming off a banner month that saw the S&P 500 rise more than 3.5%.
The U.S. government shut down after attempts made by the Republican-controlled Senate to secure a temporary spending bill failed Tuesday. Democrats are hoping to use the measure to codify an extension of health care tax credits for millions of Americans.
"The market appears unconcerned," Louis Navellier, founder of Navellier & Associates, said. "The hopeful dip buyers are going to have to wait. Momentum remains positive."
The stock market has typically glided through previous government shutdowns, but this one could be riskier given the slew of economic factors at play. Investors remain worried about a slowing labor market and inflation risks as well as historically elevated stock valuations and market concentration levels.
The nonpartisan Congressional Budget Office estimated Tuesday that the shutdown will result in the furlough of about 750,000 federal employees. Trump has threatened permanent mass firings of federal workers under a shutdown, adding a new economic risk to this stoppage.
Although Vice President JD Vance revealed at a White House press briefing Wednesday that the Trump administration will indeed "have to lay some people off if the shutdown continues," he added that no final decisions on the layoffs have been made. Vance also said that he doesn't believe the shutdown is "going to be that long," adding that there's "some evidence that moderate Democrats are cracking a little bit."
This time around, the market is likely to focus on the length of the shutdown since a prolonged closure could delay key economic data ahead of the Federal Reserve's meeting in late October. The Labor Department said Friday it will shut down virtually all activity, meaning the September nonfarm payrolls report would not be released at the end of the week.
Data released Wednesday from processing firm ADP showed that private payrolls fell by 32,000 last month, well below the gain of 45,000 that economists polled by Dow Jones had estimated. This reading, which signifies the biggest drop since March 2023, takes on even greater importance now that there's an economic data blackout because of the shutdown.
The halt means the Fed will be partially flying blind, with investors expecting the central bank's second rate cut of the year later this month and another decrease in December. Wednesday morning's ADP data as well as the consequences of the shutdown likely keep the Fed on track for an October rate cut.
"The backdrop to this shutdown is much different than the 2018 shutdown, which was the longest on record," said Jay Woods, chief market strategist for Freedom Capital Markets.
