U.S. equity markets demonstrated exceptional strength last week, with the major indexes all achieving new record highs. The S&P 500 gained 1.1% to close at a record 6,715.79, while the Nasdaq rose 1.3% and the Dow advanced 1.1%. This strong performance occurred against the headwind of the first US government shutdown in seven years.
The market's resilience was primarily driven by the US tech sector and investor expectations of continued Fed rate cuts. Weak ADP private sector jobs data reassured the current dovish monetary policy stance, while Artificial Intelligence continued its strong momentum, bolstered by news of a record $500 billion valuation of OpenAI.
Investors displayed confidence despite the government shutdown, treating it as a temporary disruption with minimal long-term economic impact based on historical precedent. The shutdown's delay of key economic reports, including the September Payroll report, did not affect the markets, as Fed’s Powell has been clear about more rate cuts ahead.
For this new week, the release of the FOMC minutes on Wednesday along with the 10 and 30 year Treasury Bonds auctions, will provide more insight into overall risk appetite amid the ongoing government shutdown. Tech sector continues its strong tone, with AMD stock rising 25% today after a deal of the chipmaker with Open AI added fuel to the artificial intelligence frenzy.
