Stock Market This Week: 3 Things to Watch As Government Shutdown Drags on

The government shutdown has put markets in a weird spot. On the one hand, no news is good news, and the absence of a key jobs report on Friday did little to derail the continued march to record highs.

On the other hand, investors are somewhat in the dark until the government reopens.

Luckily, a few updates are still trickling through. With the shutdown’s chaos expected to extend into this week, investors will be turning to a handful of sources to make sense of the economic picture.

Here’s what’s on the agenda.

FOMC minutes and a roster of Fed speakers

There’s a long lineup of Fed speakers set to deliver remarks throughout the week.

Investors will be paying close attention to commentary from top central bank officials as markets get ready for the central bank’s policy meeting at the end of this month. The delayed September jobs report is a key data point that feeds into the Fed’s outlook for rate cuts, and investors will be listening for clues about how the Fed might act in the absence of new data on the labor market.

The central bank will also release the meeting minutes from its last policy meeting on Wednesday. That’s expected to give investors a peek into how the FOMC is thinking about inflation, the job market, and the path of interest rates through the end of the year.

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“We expect the September FOMC minutes to lay bare significant divisions on the committee. In parsing the minutes, we will be looking to understand why the Fed projected deeper cuts than in June despite moving to more hawkish macro forecasts,” analysts at Bank of America wrote on Friday.

The bank said it expected only another 25 basis points worth of rate cuts for the rest of Powell’s term, which ends next May.

“But the risk is that the Fed will over-ease because it is slow to accept the labor supply story,” the analysts said.

“Absent labor market news alleviating concerns, it thus remains likely that a second move will be delivered this month. However, further easing is not assured, particularly against a backdrop of data darkness and a continued easing in US and global financial conditions,” economists at JPMorgan wrote in a note on Friday.

A job market update

Investors will be left hanging on official jobs data until the government re-opens, but public data that feeds into the jobs report is still being updated.

Haver Analytics is due to release claims data this Friday, which should be “closely watched for any uptick in layoffs,” BofA analysts said.

In a note to clients, Goldman Sachs economists said they expected federal worker firings to “weigh meaningfully” on October’s jobs data. That’s due to the government’s deferred resignation program, which allows employees to take administrative leave before resigning at a later date.

Most resignations in the program were scheduled for Sept. 30, the bank said.

“One of the shortcomings of alternative job growth data is that they generally lack visibility into government hiring trends,” the economists wrote.

Other indicators have pointed to a weakening job market. US job openings fell 17% year-over-year last month, according to the workforce intelligence firm Revelio Labs. Meanwhile, Challenger, Gray & Christmas data showed that hiring plans had slowed to their slowest pace since 2009, while firing plans sped up to their fastest pace since the pandemic.

Consumer sentiment

Investors will also get preliminary consumer sentiment data for the month of October this week. Economists are expecting the University of Michigan’s sentiment gauge to decline to a level of 53.5, down from last month’s reading of 60.4.

In a note to clients on Monday, Morgan Stanley said its gauge of consumer confidence had improved slightly in the last month to a net level of -10%, up from the prior -16% reading.

“However, this remains below the +23% recorded in January, suggesting that while sentiment is improving, it has yet to fully rebound to early-year levels,” strategists wrote.

“This week will be light on data on the economic and earnings front,” Art Hogan, the chief market strategist at B. Riley Wealth Management, wrote in a note on Monday. “But it is the calm before the storm,” he said, pointing to the first wave of third-quarter earnings kicking off next week.