Stocks Rebound Late in the Day Amid Optimism for Shutdown Resolution

Wall Street staged an impressive comeback from early session lows on renewed optimism that U.S. lawmakers are nearing a deal to end the longest government shutdown in history. Meanwhile, cryptocurrencies pared back some of this week’s steep losses.

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Nearly 400 S&P 500 stocks turned higher, erasing earlier declines as investors grew hopeful about progress in Washington. While Senate Republicans rejected Democrats’ scaled-down proposal for a one-year extension of expiring healthcare subsidies, the fact that both sides are actively exchanging offers was interpreted as a step in the right direction. The Nasdaq 100 also recovered most of Friday’s drop but still logged its weakest week since April.

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With federal agencies temporarily closed, the U.S. payrolls report was not released on Friday, leaving traders without a key economic gauge. A recent 22V Research survey revealed that investors see a cooling labor market as the biggest threat to current trading dynamics explaining why risk assets and bond yields have been reacting sharply to any labor-related developments.

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Adding to the gloom, U.S. consumer sentiment plunged to near-record lows as the shutdown dented confidence in the economic outlook and persistent inflation continued to strain household finances. “The longer the government remains closed, the more noticeable the damage will be to Main Street,” said David Russell of TradeStation.

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This comes as enthusiasm around artificial intelligence stocks faces renewed scrutiny following an extraordinary surge that some now view as unsustainable.
“The latest dip looks more like a healthy shakeout than a structural issue,” said Mark Hackett of Nationwide. “It’s a reality check for investors chasing AI-driven gains amid growth worries and stretched valuations.”

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By the close, the S&P 500 edged up 0.1% after briefly testing its 50-day moving average. The 10-year Treasury yield held steady near 4.09%, the dollar slipped 0.2%, and Bitcoin climbed roughly 2.5%.

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Even if Congress strikes a deal soon, the data disruption caused by the shutdown will linger, noted Ian Lyngen of BMO Capital Markets. A Markets Pulse survey suggested that if the shutdown extends for another week, the equity rally could falter further.

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Among 121 respondents polled between Nov. 5–7, 14% expect the S&P 500 to lose momentum if the closure lasts up to two weeks, while one-fifth foresee deeper losses if it continues longer. Roughly a third believe it would take a month to see significant pain, and 22% think the market’s rebound since April has already peaked.

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TD Securities strategists expect lawmakers to reach a resolution soon possibly before the Thanksgiving travel rush becomes heavily disrupted. “Air traffic control staffing shortages are already prompting flight cancellations, and data collection challenges are mounting as the shutdown continues,” they said.

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While no official jobs data were released this week, private payroll and layoff reports indicate a gradual labor market slowdown, said Glen Smith of GDS Wealth Management. “That cooling keeps expectations alive for the Fed to start cutting rates in December and possibly continue into early 2026.”

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According to Seema Shah of Principal Asset Management, the economy remains fundamentally healthy, even as growth moderates toward long-term trends. “The Fed’s main focus will be ensuring labor market stability,” she said. “Policymakers will likely cut rates to prevent employment weakness from deepening, which is vital to maintaining investor confidence.”

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BlackRock’s Rick Rieder rumored to be a potential successor to Fed Chair Jerome Powell echoed that sentiment, telling that “the labor market has softened considerably,” and interest rates should ideally move toward 3%.

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Recent corporate layoffs underscore that trend. Target announced plans to cut 1,800 corporate roles, or 8% of its office staff, as part of its largest restructuring in years. Amazon will eliminate about 14,000 jobs following its CEO’s warning that AI efficiencies could reduce workforce needs. Paramount Skydance, Starbucks, Delta Air Lines, CarMax, Rivian, and Molson Coors have all followed with their own job cuts.

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Jennifer Timmerman of Wells Fargo Investment Institute said the government shutdown is clouding the labor picture just as Fed officials remain divided on policy. “Job growth is slowing due to softer demand, an unwind of pandemic-era hiring, tariff uncertainty, and workforce shortages in key industries,” she noted. Despite that, Timmerman remains optimistic that policy tailwinds including tax cuts, monetary easing, and deregulation will help reaccelerate growth next year.

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Fed officials had to make their latest policy call without access to vital data, and once the government reopens, the delayed figures may complicate their December decision even further.

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With job and inflation reports in limbo, the central bank remains split on whether the labor market is weakening enough to justify another rate cut.
“We expect a December cut,” said Chris Senyek of Wolfe Research. “But if the Fed hesitates and payroll data turn negative after the shutdown ends, markets could see that as the Fed falling behind the curve.”

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Kenny Polcari of SlateStone Wealth warned that “the labor market’s cushion is getting thinner,” which could hurt consumer spending and make lofty stock valuations harder to justify. “Strong earnings won’t be enough if investors lose faith in the jobs market,” he added.

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Despite market jitters, fund flows remain supportive. U.S. equity funds posted their eighth straight week of inflows the longest streak of 2025 according to Bank of America, citing EPFR Global data. “Investors should look for attractive entry points after healthy pullbacks within this ongoing bull market,” said Craig Johnson at Piper Sandler.

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Goldman Sachs strategist Tony Pasquariello agreed that while risk-reward may not be ideal at current levels, the broader setup still favors bullish momentum. “The balance of risks continues to lean toward the bulls,” he said.

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Technicians like Dan Wantrobski of Janney Montgomery Scott see potential for a short-term bounce as the S&P 500 tests key support, though he cautions that waning momentum could trigger a 5–10% correction before year-end.

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Even so, Louis Navellier of Navellier & Associates remains upbeat: “With earnings holding strong, we could look back at current S&P 500 levels as a genuine buying opportunity heading into year-end.”

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