On Tuesday, the Dow Jones Industrial Average experienced a significant rally, gaining 559 points or 1.18%, to close at a record-high of 47,927.96. This surge was largely fueled by hopeful sentiments surrounding the potential resolution of the ongoing U.S. government shutdown. In contrast, the broader S&P 500 saw a modest increase of 0.21%, while the tech-heavy Nasdaq Composite recorded a slight decline of 0.25%.
The market responded positively after the Senate approved a funding measure aimed at ending the government standstill, which now moves to the House for final approval before reaching President Donald Trump. Mohit Kumar, a chief economist and strategist for Europe at Jefferies, expressed optimism in a note, indicating that the passage of this stopgap funding bill likely means a resolution to the shutdown could come by week’s end.
Investors shifted their focus away from tech stocks and moved towards other sectors such as health care, energy, and consumer staples, which contributed to the upward momentum of the Dow, while the tech sector, impacted by fluctuations in leading companies, showed varying performance. Twenty-six out of the 30 companies listed in the Dow saw gains on Tuesday.
Should the government shutdown conclude, it will pave the way for the release of key economic data on employment and inflation that had previously been delayed. The reestablishment of routine data releases is expected to enhance certainty and investor confidence in the market. Historically, in the aftermath of the last 15 government shutdowns since 1981, the S&P 500 has averaged a 2.7% gain in the month following government reopening, according to insights from Sam Stovall, chief investment strategist at CFRA Research.
José Torres, a senior economist at Interactive Brokers, noted that a finalized deal later this week would likely propel stocks towards stronger gains, alleviating significant economic risks and fostering improved expectations as the holiday season approaches.
In the tech sector, Nvidia shares saw a drop of 2.96% following the announcement that SoftBank had divested its entire stake in the company. Meanwhile, shares of CoreWeave, a prominent cloud-computing firm in the AI sector, plummeted by 16.31% due to disappointing guidance.
The bond market was closed for trading on Tuesday in observance of Veterans Day. Despite the slight pullback of the Nasdaq, investor sentiment is still cautiously optimistic about a potential rally continuing, with CNN’s Fear and Greed index reflecting a state of “fear” following last week’s “extreme fear” levels.
Ulrike Hoffmann-Burchardi, global head of equities at UBS, highlighted that ongoing Federal Reserve policy easing, robust corporate profits, and strong investments in AI should continue to bolster equity market growth.