NEWS

US stocks fell during trading on Tuesday, September 30, as the US government shutdown looms. Despite recent declines, Wall Street is on track for an unusually strong September.

The S&P 500 fell 0.2%, and the Nasdaq Composite fell 0.3%. The Dow Jones Industrial Average fell 52 points, or about 0.1%.

While US government shutdowns don't usually move the market, this time may be different. Investors are already concerned about a slowing labor market, the risk of stagflation, and rising US stock valuations.

The government shutdown may also prompt credit rating agencies to reconsider the US credit rating, following Moody's downgrade in May.

U.S. House Speaker Mike Johnson told CNBC on Tuesday that he was "skeptical" that a government shutdown could be avoided by midnight, saying the decision rests with Senate Minority Leader Chuck Schumer (D-N.Y.) and House Minority Leader Hakeem Jeffries (D-N.Y.). Meanwhile, Jeffries told CNBC of Republicans that "if the government shuts down, it's their call."

If the U.S. government ultimately shuts down, the September nonfarm payrolls report, scheduled for Friday, will likely not be released, the Labor Department said earlier. The report is one of several key data releases that will provide crucial insights into the direction of the U.S. economy ahead of the Federal Reserve's next policy meeting next month.

Adding to concerns about a government shutdown, U.S. President Donald Trump threatened over the weekend that a government shutdown could lead to mass layoffs of federal employees.

Jack Janasevic, chief portfolio strategist and portfolio manager at Natixis Investment Management, said the government shutdown could have some "side effects" on market sentiment and volatility in the near term.

Janasevic added: "With investors acutely aware of the risks of a weak labor market and also closely focused on indicators of tariff-to-inflation transmission, any delay in economic data collection due to the shutdown could increase uncertainty. With this increased uncertainty, we often see increased volatility in financial markets."

Janasevic continued: "Could this uncertainty be significant enough to negatively impact the economic backdrop, and with it risk assets? The effect may not be permanent, but the longer the uncertainty persists, the greater the risk."

Adam Crisafulli of Vital Knowledge echoed this view, predicting that the government shutdown could weigh on market sentiment if it persists for a relatively long period, a situation that could delay the release of important economic data. Government shutdowns typically last no more than two weeks.

"Regarding Washington, the market has broadly expected a shutdown, so investors are waiting with bated breath for now, but if this extends beyond two weeks, people will start to feel more concerned," the company's founder said.