On the Back of the U.S Shutdown, Stock Futures Are Down and the Dollar is Down

U.S. equity futures fell Wednesday after lawmakers failed to prevent a government shutdown, rattling investors with fresh uncertainty about economic data releases and federal employment. The lapse in funding has already begun halting government operations, impacting one of the nation’s largest employers.

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Futures tied to the S&P 500 and Nasdaq 100 slipped 0.5% following Congress’s failure to pass a stopgap bill. The dollar weakened for a fourth consecutive day, while gold surged to a new record above $3,875 an ounce as investors sought safety. In Asia, stocks declined 0.2%, though trading in China and Hong Kong was closed for a holiday. Treasury yields were little changed, with the 10-year note holding at 4.15%. Futures suggested European equities would open slightly lower.

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The shutdown was triggered by a standoff between Congressional Democrats and President Donald Trump over health-care funding. Trump intensified the standoff by warning that his administration could permanently fire “a lot” of federal workers if the shutdown continues.

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The shutdown is now the central focus for markets, overshadowing optimism from September’s strong equity rebound. The S&P 500 just delivered its best September performance in over 15 years, powered by enthusiasm for artificial intelligence and expectations of lower interest rates. But investors fear the shutdown could derail the outlook by delaying key data that informs the Federal Reserve’s monetary policy path.

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“Things could get ugly if the shutdown creates an information vacuum for jobs and inflation data ahead of the next Fed rate decision,” said Michael Bailey, director of research at FBB Capital Partners. “With stock valuations back near prior peaks, even small disappointments could trigger a sharper correction in the near term.”

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The Congressional Budget Office estimates that roughly 750,000 federal employees will be placed on unpaid leave, translating to about $400 million in lost wages per day. Beyond the immediate impact on workers, reduced income could weigh on consumer spending and economic growth if the shutdown drags on.

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One of the biggest worries for Wall Street is that the shutdown could delay the release of crucial economic indicators, starting with Friday’s nonfarm payrolls report from the Bureau of Labor Statistics. Investors use the monthly jobs report as a key gauge of the health of the labor market and as a guide for Federal Reserve policy expectations.

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Recent data has already shown signs of cooling in the labor market, paired with inflation that remains above the Fed’s 2% goal but is showing progress toward moderation. Without access to this information, policymakers and investors could be flying blind.

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“If we didn’t get the jobs report, and even worse, if inflation data is also delayed, that would become a significant risk to market stability,” said Hebe Chen, analyst at Vantage Markets, in an interview with Bloomberg Television. “The market hasn’t fully priced in that possibility yet.”

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While uncertainty dominates the short term, analysts believe the current shutdown may prove relatively brief compared to past episodes. Evercore ISI strategist Sarah Bianchi wrote in a client note that resolution will likely come once Democrats agree to a temporary funding deal that allows further negotiations on health-care spending.

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“At this point, we expect the shutdown to last one to two weeks,” she said. “We don’t see meaningful long-term damage to the economy as long as it wraps up within that time frame, which has been the case with prior shutdowns.”

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For now, investors are caught between the resilience seen in recent stock gains and the risk of political dysfunction spilling over into the economy. Gold’s surge to record levels highlights a renewed appetite for safe havens, while the dollar’s decline underscores fading confidence in Washington’s ability to resolve fiscal battles.

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If the shutdown extends longer than expected, the impact could go beyond delayed data releases, weighing on consumer confidence, corporate spending, and the broader outlook for growth. For the Federal Reserve, the lack of fresh economic data could complicate decisions on whether to proceed with rate cuts later this year.

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As Bailey at FBB Capital put it, “Markets hate uncertainty, and right now the shutdown is injecting it at the worst possible moment just as investors were regaining confidence from AI enthusiasm and expectations for looser monetary policy.”

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