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On October 1, 2023, the S&P 500 Index ($SPX) declined by 0.08%, while the Dow Jones Industrials Index ($DOWI) increased by 0.06%. The Nasdaq 100 Index ($IUXX) fell by 0.02%. The mixed performance of stock indexes is attributed to a government shutdown in the U.S., coming after lawmakers failed to pass a continuing resolution. This situation has led to a one-week low for the dollar index and record high gold prices, amidst escalating risk-off sentiment in asset markets.
Additionally, U.S. MBA mortgage applications fell by 12.7% in the week ending September 26, with a purchase mortgage sub-index decrease of 1.0% and a refinancing sub-index drop of 20.6%. The average 30-year fixed mortgage rate rose to 6.46%, up from 6.34% the previous week. In the labor market, the ADP employment change for September unexpectedly declined by 32,000, marking the largest drop in 2.5 years, while the ISM manufacturing index increased to a 7-month high of 49.1, surpassing expectations of 49.0.
Bloomberg Economics estimates that a government shutdown could furlough approximately 640,000 federal workers, pushing the unemployment rate up to 4.7%. Moreover, there’s a 100% chance of a 25 basis point rate cut by the Federal Reserve at the next FOMC meeting on October 28-29, amid overall uncertainty in the financial markets.
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