U.S. Stocks Rally as Shutdown Fears Fade – Markets Hit Fresh Records

Record-breaking rally: On Oct. 1, all three major U.S. indexes closed at new highs – the Dow, S&P 500 and Nasdaq each gained about +0.1–0.4% ^[1] ^[2]. This extended a four-day upswing, with the S&P 500 closing above 6,700 for the first time ^[3].
Shutdown shrugged off: The federal government did shut down at midnight on Sept. 30, but Wall Street largely shrugged it off. Investors focused on policy easing instead: the shutdown’s impact on the economy and data releases (like next week’s jobs report) loomed in the background ^[4] ^[5].
Weak jobs data fuels Fed cuts: Late on Oct. 1, ADP reported that U.S. private payrolls unexpectedly fell by 32,000 in September – the first decline since March 2023 and well below the ~45,000 gain economists expected ^[6] ^[7]. This surprising slowdown in jobs further cemented traders’ bets on Federal Reserve rate cuts: futures markets were almost fully pricing in two 25-basis-point cuts by year-end ^[8] ^[9].
Bonds and safe havens: Yields slid as investors leaned toward easier policy. The 10‑year Treasury yield fell to ~4.10% from 4.15% the day before ^[10], while gold hit an all-time high around $3,895 an ounce ^[11] ^[12]. The U.S. dollar eased (DXY ~97.7) and bitcoin ticked higher as confidence in a soft-landing Fed policy grew ^[13] ^[14].
Sector movers:Healthcare stocks led gains, extending a rally sparked by a Trump–Pfizer price-deal on Oct. 1 ^[15] ^[16]. Drug giants like Pfizer, Eli Lilly and biotech names jumped ~8–10% as the White House and industry agreed on lower drug prices ^[17] ^[18]. Technology and semis also powered higher: Micron (+9%), Seagate and Western Digital (~+8%) surged on strong AI-driven demand for data storage ^[19] ^[20]. Utilities saw spikes – AES jumped ~17% on takeover rumors ^[21] – while materials stocks lagged (materials sector fell >1% ^[22]). Consumer cyclicals were mixed (Nike +6% after upbeat sales) and energy edged slightly lower (oil ~$62/bbl) ^[23] ^[24].
Big stock news: Lithium Americas (LAC) soared ~23% on Oct. 1 after the U.S. Energy Department announced it was taking a 5% stake in the company and its Nevada lithium mine ^[25] ^[26]. Nike shares leapt on surprisingly strong quarterly sales ^[27], while Docusign slid further on news its product faced competition. Intel spiked ~7% after reports it was in talks to make rival AMD chips on its foundry ^[28]. (In contrast, Corteva fell ~9% on a planned business split ^[29].) Conagra Brands, a food consumer-stock, reported Q1 results on Oct. 1 that included a 64% EPS drop; the company reaffirmed its full-year guidance despite modest sales declines.
Macroeconomic backdrop: Fed policymakers had cut the federal funds rate by 25bp to 4.00–4.25% on Sept. 17 (the first cut of 2025) and signaled two more cuts likely this year ^[30]. Inflation remains stubbornly above target – August CPI was +2.9% year-on-year ^[31] – and unemployment has ticked up (~4.3% in August) ^[32]. Last week’s jobless claims fell to 218,000 (seasonally adjusted) ^[33], but continuing claims and slower hiring (NFP gains averaging just +29,000 over 3 months ^[34]) underscore a soft patch. The Institute for Supply Management’s manufacturing index even “edged toward recovery” in September ^[35].

Market commentary and outlook

Lara Castleton of Janus Henderson noted that Tuesday’s White House–Pfizer announcement “was the catalyst for healthcare,” freeing up investors to rotate into the beaten-down sector ^[36]. Kyle Rodda at Capital.com observed that the weak ADP report “suggests the U.S. economy is in almost dire need for further policy support,” so markets are pricing in much higher odds of Fed rate cuts in October and December ^[37]. He added that “after some initial jitters, markets shrugged off the U.S. government shutdown, at least for now,” since past shutdowns have had “trivial” market impact ^[38].

Analysts are watching October closely. Goldman Sachs equity strategist John Marshall warned that the unusually strong September rally may give way to volatility: “Using history as a guide, we expect global equity volatility to increase in October,” he said ^[39] ^[40], noting October is typically the year’s most eventful month (earnings season, Fed commentary, CPI data). In short, strategists say October could be a “gauntlet” that tests this stock-market momentum ^[41] ^[42].

Corporate America’s CEOs also offered cautious commentary. For example, Broadcom and Amazon (both AI-related) helped lift markets recently, and many eyes are on upcoming earnings. Nike’s CEO emphasized progress in turning around the business but acknowledged “tariff uncertainty” ahead ^[43] ^[44]. On the policy front, the Supreme Court temporarily blocked President Trump’s attempt to fire Fed Governor Lisa Cook ^[45], a win for Fed independence that some analysts saw as reducing tail risk around U.S. monetary policy.

Bottom line: Through Oct. 1–2, U.S. equity markets remained upbeat. Investors cited slowing jobs growth and Fed easing bets as reasons to keep buying stocks, while largely ignoring the newly-started government shutdown. Major indexes set fresh highs, with technology and healthcare leading the advance ^[46] ^[47]. Looking ahead, analysts caution that seasonal factors and rich valuations could introduce turbulence next month – but for now, the market’s tilt is toward more gains on hopes of lower interest rates and sustained economic resilience.

Sources: Latest market reports and data from Reuters, Bloomberg, Investopedia, AP News and company releases ^[48] ^[49] ^[50] ^[51] ^[52], as cited.

Year-end rally or a reversal ahead?