NEW YORK: The main US stock indexes were on track to pare quarterly gains on Tuesday as a looming government shutdown risked delaying economic data, heightening investor anxiety around the Federal Reserve’s next move.
With valuations stretched, markets are banking on a dovish Fed to keep the rally alive, making any disruption to the central bank’s visibility on economic data a source of concern.
While previous shutdowns have had a limited impact on markets, some analysts warned the current episode could be more disruptive, given the delicate economic backdrop.
“This could be more serious. Should any shutdown be protracted, that could lead to other government economic statistics being delayed,” said David Morrison, senior market analyst at Trade Nation.
With the outlook for upcoming reports unclear, markets are leaning heavily on the data at hand.
A Labor Department report on Tuesday showed job openings increased marginally in August, while hiring and layoffs declined. Another data point showed US consumer confidence declined more than expected in September.
At 11:54 a.m. ET, the Dow Jones Industrial Average fell 118.48 points, or 0.26 percent, to 46,197.59, the S&P 500 shed 7.66 points, or 0.11 percent, to 6,653.55, and the Nasdaq Composite lost 36.78 points, or 0.16 percent, to 22,554.37.
Consumer discretionary shares lost 1.2 percent on the S&P 500, weighed by losses in Tesla and Amazon, which fell 1.8 percent and 1.5 percent, respectively. The stocks also weighed on the Nasdaq.
The S&P 500 communication services sector fell 0.9 percent, dragged by losses in Meta Platforms and Alphabet, down 1.1 percent and 1.2 percent, respectively.
This was countered by a 0.6 percent gain in tech and a 0.8 percent rise in healthcare stocks.
The Dow was dragged down by American Express, Goldman Sachs and JPMorgan, which declined 2.9 percent, 1.7 percent and 1.1 percent, respectively.
Meanwhile, Fed Vice Chair Philip Jefferson warned the job market could face stress without central bank support, while Boston Fed President Susan Collins said she was open to additional rate cuts.
Traders will also look to a busy slate of Fed speakers for direction as they speak later in the day.
Equities have held up well through the third quarter, with the benchmark S&P 500, the tech-heavy Nasdaq and the blue-chip Dow Jones Industrial Average set to notch gains for the second straight quarter.
Despite Tuesday’s retreat, the S&P 500 is on track for its best third-quarter performance since 2020.
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