Wall Street slides as the U.S. government shutdown is in effect

[Wall street district in New York City with USA flags in the background]
FilippoBacci

Wall Street moved lower on Wednesday after a weaker-than-expected private employment report. The release carried added weight this week, as the ongoing government shutdown is now in effect which means Friday’s jobs report will not be published.

The tech-focused Nasdaq Composite (COMP:IND [https://seekingalpha.com/symbol/COMP:IND]) moved down by 0.3%. At the same time, the benchmark S&P 500 (SP500 [https://seekingalpha.com/symbol/SP500]) declined by 0.2% and the blue-chip Dow (DJI [https://seekingalpha.com/symbol/DJI]) had fallen 0.1%.

From a sector-by-sector point of view, eight of the 11 S&P segments were in negative trading territory with Communication Services struggling the most. Going the other way, Health Care has been the top performing area so far.

U.S. Treasury yields are lower [https://seekingalpha.com/news/4500626-treasury-yields-slide-in-response-to-private-payrolls-data] as investors step in and purchase bonds. The longer-end U.S. 10-year Treasury yield (US10Y [https://seekingalpha.com/symbol/US10Y]) moved down 5 basis points to 4.09% and the shorter-end U.S. 2-year Treasury yield (US2Y [https://seekingalpha.com/symbol/US2Y]) pushed down 7 basis points to 3.54%.

The U.S. government shutdown [https://seekingalpha.com/news/4500390-us-government-shutdown-officially-begins] commenced at midnight on Wednesday after the Senate rejected a short-term spending measure, forcing agencies to suspend all but essential operations.

“The government shutdown is another brick in the stock market's wall of worry. It comes at a time when many investors are worried that the stock market is vulnerable due to high valuations and a very strong performance throughout the month of September,” Glen Smith, chief investment officer, GDS Wealth Management stated.

“October is known to be a seasonally volatile month for stocks, and while government shutdowns historically are not major market moving events, we would not be surprised to see volatility increase in the very near-term,” Smith added.

On the economic front, ADP's gauge of private sector employment showed a decrease [https://seekingalpha.com/news/4500570-us-private-sector-employment-unexpectedly-contracts-in-september-adp-jobs-report#hasComeFromMpArticle] of 32K jobs in September. Economists had been expecting an increase of 50K. The data point has unwittingly become a key labor market indicator this week after the government shutdown meant there was only one employee at the U.S. Bureau of Labor Statistics, causing a delay to Friday's much anticipated nonfarm payrolls report.

"Revisions to ADP payrolls reveal more weakness in private sector hiring, although the payroll company said the granularity on the Census data required more estimates. The ADP confirms other data on the labor market that is weak. The hardest hit region is the Industrial Midwest; the most robust gains were in the Northeast," Diane Swonk of KPMG said.

As for stocks that are on the move, shares of Corteva are lower by 6.8% as the company ams to split into two [https://seekingalpha.com/news/4500547-corteva-to-split-into-two-independent-public-companies-by-2026] independent public companies by 2026.

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