Stocks hit new record highs on Thursday, even while the U.S. government shutdown dragged on into its third day. That’s right, the markets climbed while Washington stayed stuck in its own mess.
The S&P 500 nudged higher by “0.06%.” The Dow Jones Industrial Average was up “79 points, or 0.17%.” The Nasdaq Composite gained “0.4 %” Not exactly fireworks, but enough to keep breaking records.
Meanwhile, bonds had a move of their own. Prices rose, and that meant yields came down. “The yield on the 10-year Treasury fell 0.019% to 4.087%, and the yield on 30-year Treasuries dipped 0.022% to 4.693%.” As for the two-year? “Two years were flat.”
And here’s where it gets interesting. Investors are betting that the Federal Reserve is going to step in and start cutting rates. Not just once. Not even twice. But possibly three times. “The odds of a third cut in December implied by the fed funds futures market stand near 90%, according to the CME Group’s FedWatch tool.” Just last week, those odds were way lower: “A week ago it the odds of a third cut in December were just 60.5%.”
So where were the biggest winners? Fidelity says the gains came from “the materials, information technology, communications, and industrials sectors.” And where did stocks sink? “The financial, consumer discretionary, consumer staples, real estate, health care, energy, and real estate all declined.” In other words, Wall Street picked its favorites while tossing the rest to the side.
The pattern is clear. The market is convinced the Fed will ride to the rescue with rate cuts, and that belief is pushing stocks higher even as the government stumbles through another shutdown.
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