Sp 500 Down Amid Fears Of Government Shutdown

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Sp 500 Down Amid Fears Of Government Shutdown

S&P 500 Down By 0.4% Amid Fears Of Government Shutdown

The S&P 500 index experienced downside momentum on Friday as the fears of a potential governmental shutdown have increased tremendously.

Against this backdrop, most of the stocks turned red, which also pushed the S&P 500 index lower. In addition, the signs of easing inflation in the USA are yet another reason for the bearish price action in the US stocks.

Overall, the S&P 500 turned lower by 0.4%, while the DJIA experienced a 0.6% downside. on the contrary, the NASDAQ went up by 0.01%, which is almost minimal. It can also be viewed that the NASDAQ index failed to gain any impressive gains and had to close the day with a 0.01% upside.

Inaction By US Representatives

The biggest issue right now is that the US representatives didn't agree on any action to avert the government shutdown. The house was expected to pass a bill involving short-term spending by the US government, but it has yet to materialize. If nothing is done, then October 1 will be the first day of government shutdown.

According to Morgan Stanley, the government shutdown is not an issue anymore and is priced in by the market players. However, they added that the shutdown will dent the economic growth during Q4.

They also added that the real question now is how long the government shutdown will actually last. If the shutdown continues for several weeks or months, then the GDP during Q4 may turn negative. At the same time, the Fed's target of rate cuts from Q1 of 2024 will also remain unchanged.

The core inflation from the US also continues to show a consistent slowdown, which highlights that the disinflationary trend continues. At the same time, it also tells us that the Fed is almost near to its peak rate policy.

It appears that the government shutdown is now a done deal, and there's no way to avoid it. The real question is now about the duration of this shutdown and its effect on the US GDP.

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