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US stocks registered modest gains on Wednesday as investors digested Treasury yield drops, corporate news, and the current government shutdown. The S&P 500 gains 0.1% by midday, and the Nasdaq Composite and Dow Jones Industrial Average also make slight gains. European markets did better, with the Stoxx Europe 600 up 1.2%. The MSCI World Index rose 0.2%, reflecting a cautious optimism amid continued policy uncertainty.
In the bond market, the 10-year US Treasury yield dipped three basis points to 4.12%, extending earlier declines after touching 4.08%. The move came after new data fueled expectations that the Federal Reserve will deliver another interest rate cut this month. Germany’s 10-year yield remained steady at 2.71%, while Britain’s held at 4.70%.
Commodities showed mixed performance. West Texas Intermediate crude fell 0.9% to $61.80 per barrel, pressured by demand concerns. In contrast, spot gold rose 0.2% to $3,866.28 an ounce, supported by safe-haven demand.
Fresh labor market data reinforced bets on additional monetary easing. The ADP report revealed that private payrolls declined by 32,000 in September, marking the most significant drop since March 2023. This followed a revised decline of 3,000 in August, underscoring signs of a cooling job market. With the government shutdown limiting official data releases, such private reports gain added weight for policymakers.
Traders increased wagers on two further Federal Reserve rate cuts this year, anticipating a 25-basis-point reduction at the October meeting. The Fed faces a data blackout due to the shutdown, with the Labor Department halting most activities, including the release of nonfarm payrolls. Despite this, economists argue the central bank has enough evidence of slowing labor conditions to proceed with rate adjustments.
Company news also impacted investor sentiment. Amazon has launched a new private label grocery brand aimed at price-conscious shoppers, offering products mostly under $5. Peloton announced a redesign of its hardware lineup, along with price increases, as part of an effort to stabilize performance under new management leadership.
In the finance sector, a major shareholder of BBVA agreed to a takeover bid by Banco Sabadell, in a deal valued at €17 billion. The acquisition would strengthen BBVA's position in the Spanish banking sector. Meanwhile, Pfizer negotiated an agreement with the White House to reduce some drug prices by as much as 85% and avoid threatened tariffs. Other drug companies will likely follow.
Also Read: How the Government Shutdown Will Impact the US Stock Market
The US government shutdown, triggered by the Senate’s failure to pass a temporary spending bill, added a layer of uncertainty. The Congressional Budget Office estimated that about 750,000 federal employees would face furloughs. President Donald Trump’s warning of potential permanent layoffs has further unsettled markets.
Shutdowns have had a limited impact on the market in the past, but analysts say this episode might be more disruptive. Investors worry about delays in key economic data, declining consumer confidence, and possible spillover effects on growth. Equity markets remain sensitive to both the duration of the closure and cues from the bond market.
