The US government has shut down after the Senate failed to get the 60 votes necessary on a Republican bill or a Democratic plan. No compromise bill was offered, ensuring the first shutdown since Trump’s first term in 2018. The stoppage will delay release of Friday’s September jobs report unless the stoppage ends quickly.
Trump said Tuesday, “a lot of good can come down from shutdowns. We can get rid of a lot of things that we didn’t want.” Trump has added an uncertainty to this shutdown by promising to consider mass firings.
A Bloomberg review of government agency contingency plans reveals that two-thirds of the government workforce plans for over 400,000 employees to be temporarily furloughed. The contingency plans made no mention of permanent staffing reductions.
Even though some essential federal employees like the TSA workforce will continue to work, the federal employee paychecks stop. Payments for Medicare benefits and Social Security continue, as does the US Postal Service deliveries which are largely funded by postage stamp sales. The largely self-funded Federal Reserve will also continue operations although the October meeting interest rate decision will be muddied by the government data blackout.
How long the shutdown will last is now the question of market focus. Based on past shutdowns, political posturing usually gives way to continuing resolutions that avoid any lasting economic damage. Thus, Wall Street generally ignores shutdowns.
However, the wrangling between lawmakers seems more pointed this round and the presidential threats against Democrats have no precedence. With stakes higher because of the current Federal Reserve interest rate reduction cycle and the extended stock market bull-run, this shutdown could have larger implications for the markets.
Pharmaceutical tariffs of 100% and 25% tariffs on heavy-duty trucks kick in today as we start October and Q4 of 2025. Trump has pledged to carve out exemptions for pharmaceutical companies that build in the US. Pfizer (PFE) secured a 3-year grace period this week as part of a deal with the Trump administration to lower some of their US drug prices.
Today’s new tariffs will be followed by 10% tariffs on “softwood timber and lumber” and 25% duties on “certain upholstered wooden products” in two weeks on October 14.
Safe-haven gold continues to push new all-time highs and $4000/oz. is in sight.
Corporate earnings premarket include Acuity (AYI) and RPM International (RPM).
The economic calendar includes ADP Non-Farm Employment Change @ 8:15amET, S&P Global Manufacturing PMI @ 9:45am ET, ISM Manufacturing PMI & Prices and Construction Spending @ 10:00am ET, and Crude Oil Inventories @ 10:30am ET.
Richmond Fed’s Thomas Barkin gives a speech @ 12:15pm ET.
Volatility remains steady and moderate. The ES 5-day average daily range is 54.50 points.
Whale bias is short into the US session open on significant overnight large trader volume.
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