Investors Are Ignoring the Threat of Government Shutdown
Betting market odds indicate the government will shut down this week but the stock market doesn't seem to mind.
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Despite betting market odds of 68% that the government will shut down on October 1, the stock market held up fairly well on Monday. Big-cap technology and a 0.45% gain for the Magnificent Seven (MAGS) offset negative breadth.
There continues to be pockets of speculative interest in smaller stocks, especially in the biotechnology (IBB) and cannabis (MSOS) sectors. Traders are still hungry for action and are not worried about the impact of macroeconomic events on individual stocks.
In addition to talk about a government shutdown, the headlines were dominated by Trump’s proposed Middle East deal. It is far from done, but was presented as a significant breakthrough, although Hamas hasn’t indicated its willingness to accept it.
On Tuesday, there will be more negotiations on the government shutdown, as well as Consumer Confidence and Job Openings reports. However, what appears to be impacting the market more than anything else is speculation that AI spending is overheated and that there is a bubble forming. Chips and AI stocks ignored that chatter on Monday, but the talking heads in the media are becoming increasingly shrill about problems in AI.
Technically, the indices remain in good shape, although they are a bit extended and could use more consolidation. There is likely to be some volatility on the government shutdown negotiations on Tuesday, but the next big event will be the third quarter earnings season, and that has the potential to create renewed momentum if reports are solid.
Have a good evening. I’ll see you tomorrow.
At the time of publication, DePorre had no positions in any securities mentioned.
