S&P 500 Rises to Record Highs After U.S. Government Shuts Down

At one minute past midnight on 1 October 2025, much of the U.S. government shut down because of a political impasse and it stayed shut down through the rest of the trading week. Investors reacted by sending the S&P 500 (Index: SPX) to new record high closes on each trading day of this latest shutdown.

On Friday, 3 October 2025, the index closed at 6,715.79, just a hair up over its previous day’s close but also 1.1% higher than it closed in the preceding week.

Much of that gain came as the week’s news flow indicated the U.S. economy experienced sluggish job growth through the end of September 2025. The apparent sluggishness increases the probability the Fed will have to cut U.S. interest rates further to stimulate job growth, the expectation for which boosted stock prices.

The CME Group’s FedWatch Tool projects two more quarter point cuts in 2025, coming on 29 October (2025-Q4) and 10 December (2025-Q4). In 2026, the FedWatch tool’s forecast anticipates a slower pace for additional rate cuts, with quarter point rate cuts on 18 March (2026-Q1) and 17 June (2026-Q2).

That’s one more rate cut in the first half of 2026 than was expected a week earlier. The latest update of the alternative futures chart shows the trajectory of the S&P 500 is consistent with investors fixing their attention on the distant future quarter of 2026-Q2.

Although the U.S. government shutdown dominated news headlines during the trading week ending on Friday, 3 October 2025, investors essentially shrugged it off as a nonfactor. As they should, seeing as it is little more than a political noise event. Here is our summary of the week’s more significant market-moving headlines:

Monday, 29 September 2025

• Signs and portents for the U.S. economy:

• US pending home sales rebound in August amid low mortgage rates
• Oil prices drop 3% as OPEC+ plans for oil output hike

• Exclusive: OPEC+ plans another oil output hike in November, sources say

Fed minions still sending mixed messages:

• Fed’s Williams: Recent rate cut aimed at bolstering job market
• Fed’s Musalem: Open to further cuts but must be cautious
• Fed’s Miran sees Trump economic overhaul driving down rates, others see a risky bet
• Fed’s Hammack says US needs to maintain restrictive policy amid inflationary pressures

Bigger trouble developing in China:

• China’s factory activity likely slows again amid weak demand, trade tensions – Reuters poll

Japan’s economy improves, BOJ minions gearing up to hike Japan’s interest rates:

• Japan says economy recovering but US tariff impact seen in auto sector
• BOJ board’s hawkish flex lowers bar for an October rate hike

S&P 500 closes higher as AI leader Nvidia rebounds, EA surges on takeover

• S&P 500, Nasdaq climb as investors brush off shutdown woes, hawkish talk
• Nvidia leads chip stocks higher to start the week
• ‘Battlefield’ maker Electronic Arts to go private in record-setting $55 billion LBO

Tuesday, 30 September 2025

• Signs and portents for the U.S. economy:

• Moderate US job openings, weak hiring underscore softening labor market
• US auto bankruptcies show rising credit pain in low-income households
• Oil price outlook steady as rising supply offset by concerns over Russian output

• OPEC+ mulls speeding up oil output hikes again, sources say
• Oil companies slash jobs by the thousands as prices fall, tariffs rise and industry consolidates

Fed minions claim they want more data before more rate cuts, say they’ll use “other” data if they can’t get it from government:

• Exclusive: Fed’s Collins cautions against aggressive rate cuts given inflation issues

• Fed’s Collins notes openness to cutting rates again depending on data
• Fed’s Goolsbee: Will need to turn to other data sources if US reports suspended during shutdown -Fox Business
• Government shutdown impact on economy depends on length, breadth of outage, Fed’s Goolsbee says

Fed’s Jefferson says he has not considered whether to remain as governor after vice chair term ends

Bigger trouble, stimulus developing in China:

• China factory activity shrinks again as firms watch for stimulus, US trade deal

ECB minions say Eurozone inflation totally under control:

• Euro zone inflation risk quite contained, Lagarde says

• Euro zone inflation data points to uptick on slower energy price fall

Dow closes at record high, S&P 500 logs winning month, as investors shake off government shutdown concerns

• Wall Street indexes close higher with quarterly and monthly gains even as US government shutdown looms

Wednesday, 1 October 2025

• Signs and portents for the U.S. economy:

• Oil slides to 16-week low on US and Asia economic worries, and expected OPEC+ production increase
• US manufacturing eyes recovery in September, orders contract
• U.S. government shutdown officially begins

• Government shutdown updates: Trump administration says layoffs coming in days

US private payrolls fall in September

Fed minion wants to see more layoffs, more rate cuts more likely:

• Fed’s Logan: US may need more slack in job market to hit 2% inflation
• The government shutdown is likely to cement additional Fed interest rate cuts
• Supreme Court lets Fed Governor Lisa Cook keep job pending January oral argument

Bigger trouble developing in China:

• Factories struggle in September as soft demand in China and US take toll

ECB minions thinking about letting current Eurozone interest rates ride:

• Euro zone inflation picks up, bolstering ECB’s case for staying on hold

S&P 500 notched a record close as Wall Street rallied despite the government shutdown

• Wall St rebounds as rate-cut hopes temper shutdown worries
• S&P 500 rises to new record, reversing earlier losses as traders bet on short-lived shutdown

• S&P 500 10 best and worst performers of 2025 as Q3 closes

Thursday, 2 October 2025

• Signs and portents for the U.S. economy:

• Oil falls 2% to four-month lows on oversupply concerns
• With the US government dark, alternate sources show a sluggish September for jobs

• US layoffs fall in September but year-to-date planned hiring at lowest in 16 years

US government shutdowns raise uncertainty but rarely have lasting effect on economy

Fed minion says Fed needs to be cautious when changing US interest rates:

• Fed’s Logan says US central bank must be ‘very cautious’ on rate cuts

Wall Street ended in the green on day two of the government shutdown

• Wall Street closes with records as tech support offsets labor, shutdown uncertainties

Friday, 3 October 2025

• Signs and portents for the U.S. economy:

• Oil posts 8% weekly loss on potential OPEC+ supply additions

• OPEC+ set for another oil hike as Saudi and Russia debate size, sources say

Shutdown puts jobs data on ice, fogs reading of economy

• For a jobs day data fix in a US shutdown, here is what the experts are saying
• Who Needs The BLS: US Added 60,000 Jobs In September, Best Month Of 2025

Fed minions say they’re preparing for the unexpected, others send more mixed messages about prospects for more rate cuts:

• Fed’s Williams says central banks must prepare for the unexpected
• Fed’s Miran wants aggressive rate cuts but downplays differences with other officials
• Fed’s Jefferson repeats job market could face stress without support
• Fed’s Goolsbee a ‘little wary’ of front-loading too many rate cuts -CNBC

BOJ minions / Bigger trouble developing in Japan:

• BOJ’s Ueda warns of global uncertainty, keeps markets guessing on next hike

S&P 500 posts winning week, but Friday rally fizzles

• Dow, S&P 500 manage record closing highs; Nasdaq falls in volatile session
• No payrolls, no problem as Wall Street extends run of highs

The Atlanta Fed’s GDPNow tool projection of real GDP growth in the U.S. during the current quarter of 2025-Q3 ticked down to +3.8% after last week’s forecast of +3.9% annualized growth.

Image credit: Microsoft Copilot Designer. Prompt: “An editorial cartoon of a Wall Street bull who is happy the S&P 500 is at new record highs, while a news ticker says ‘WHAT SHUTDOWN?’”