S&P 500 Closes at New High as Investors Shrug Off the Government Shutdown

Performance for Week Ending 10.3.2025:

The Dow Jones Industrial Average (Dow) gained 1.1 percent, the Standard & Poor’s 500 Index (S&P 500) added 1.1 percent, and the Nasdaq Composite Index (Nasdaq) finished up 1.3 percent. Sector breadth was mixed, with six of the S&P sector groups closing higher and five closing lower. The healthcare sector (+6.8 percent) was the best performer, while energy (-3.4 percent) was the weakest.

*See below for Index Definitions

MARKET OBSERVATIONS: 9.29.2025  – 10.3.2025

After taking a pause to refresh during the prior week, the S&P 500 shifted back into drive and finished last week solidly higher and at a new all-time high. For the month of September, the S&P 500 posted a 3.5 percent gain—the best September return since 2010. For the third quarter, the S&P gained 7.8 percent, it seventh quarterly gain out of the past eight. The rally during the quarter was broad based with ten of the 11 S&P sector groups posting positive performance. The technology sector (+13.0 percent) led the pack followed by communication services (+11.8 percent) and consumer discretionary (+9.4 percent).

Markets shrugged off the mid-week government shutdown as history shows they tend to be short lived and have little impact on the economy. The one casualty of the shutdown is that government generated economic data isn’t being issued, including the closely watched monthly payroll data which was scheduled to be released last Friday. Investors have been watching labor data closely as recent softness will likely be the key factor for the Fed to continue to cutting interest rates. Weak data last week from non-government sources seemed to have increased confidence the Federal Reserve will continue cutting interest rates in the months ahead. Bloomberg’s World Interest Rate Probability tool has the odds of a 25-basis point cut at the October meeting at 98 percent, while the data also shows 46 basis points of easing are expected by year-end.

Fed Speak – Mixed Messages: Cleveland Fed President Hammack said inflation could stay above target until 2028, a concern for her as she argues against interest-rate cuts. Hammack also observed that the central bank has missed its 2 percent goal for more than 4 1/2 years and is likely to keep doing so for some time. New York Fed President Williams said that emerging signs of weakness in the labor market drove his support for cutting interest rates at the most recent central bank meeting. St. Louis Fed President Musalem said he’s open to further interest rate cuts, but that policymakers should move carefully, with inflation still running above the central bank’s target. Musalem added that monetary policy is somewhere in between modestly restrictive and neutral, and noted long-term inflation expectations are still anchored. Dallas Fed President Logan said she’ll approach additional rate cuts very cautiously while inflation risks remain more prominent than the threat of higher unemployment. Fed Vice Chair Jefferson warned the U.S. central bank faces a softening labor market at the same time as inflation pressures increase, complicating the outlook for monetary policy. Jefferson said the level of uncertainty around his outlook for the economy is high. Boston Fed President Collins said further interest-rate reductions may be appropriate in 2025 given a weaker labor market, but officials need to remain on guard against the possibility of persistent inflation.

Economic Roundup: A report from global outplacement firm Challenger, Gray & Christmas said U.S. employers announced fewer layoffs in September but hiring plans so far this year were the lowest since 2009. The report came a day after payroll processor ADP said job creation in the labor market continued to lose momentum in September across most sectors. New data showed that private employers cut 32,000 jobs in September—missing Wall Street estimates of 51,000 jobs created. Meanwhile, the Labor Department's Bureau of Labor Statistics said in its Job Openings and Labor Turnover Survey that U.S. job openings increased marginally in August while hiring declined, consistent with softening labor market conditions. In the housing market, pending home sales rose more than expected in August, a sign that lower mortgage rates may be pushing some buyers and sellers back into the market. Elsewhere, consumer confidence fell in September as Americans worried about inflation and became concerned about future job availability.

The Week Ahead: Political risk will stay in focus this week as the government remains shutdown, which will continue to impact the release of U.S. government data. Investors have become increasingly concerned that the shutdown could become protracted, with Polymarket now suggesting a 70 percent chance that it will last beyond October 15. On the data front, the key report will come on Friday when the University of Michigan consumer survey data is released. It will be the calm before the storm on the earnings front, with just four members of the S&P 500 scheduled to release results. The following week 40 companies will report results including banking giants JP Morgan, Goldman Sachs, Wells Fargo, Citigroup, Bank of America, and Morgan Stanley. Finally, it will be another busy week for Fed speakers with 19 speeches scheduled throughout the week, including Fed Chair Powell on Thursday. The Federal Reserve is also expected to release the meeting minutes from the September FOMC meeting.

— By Michael Schwager, Chief Market Strategist, Managing Director

Definitions

The Dow Jones Industrial Average is a price-weighted average of 30 blue-chip stocks that are generally defined as the leaders in their industry. It has been a widely followed indicator of the stock market since October 1, 1928.

Wilshire 5000 Total Market Index^SM represents the broadest index for the U.S. equity market, measuring the performance of all U.S. equity securities with readily available price data. The index is comprised of virtually every stock that: the firm's headquarters are based in the U.S.; the stock is actively traded on a U.S. exchange; the stock has widely available pricing information (this disqualifies bulletin board, or over-the-counter stocks). The index is market cap weighted, meaning that the firms with the highest market value account for a larger portion of the index.

Standard and Poor's 500^© Index is a capitalization-weighted index of 500 stocks. The index is designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

The Nasdaq Composite Index is a broad-based capitalization-weighted index of stocks in all three Nasdaq tiers: Global Select, Global Market and Capital Market. The index was developed with a base level of 100 as of February 5, 1971.

This material contains opinions of the author, but not necessarily those of Guggenheim Partners, LLC or its subsidiaries. The opinions contained herein are subject to change without notice. Forward looking statements, estimates, and certain information contained herein are based upon proprietary and non-proprietary research and other sources. Information contained herein has been obtained from sources believed to be reliable, but are not assured as to accuracy. Past performance is not indicative of future results. There is neither representation nor warranty as to the current accuracy of, nor liability for, decisions based on such information. No part of this material may be reproduced or referred to in any form, without express written permission of Guggenheim Partners, LLC.