U.S. stock futures tumbled Wednesday as the federal government shut down, pushing investors toward gold as a safe haven amid worries over potential economic fallout. Nike provided a rare bright spot, with first-quarter results suggesting that its turnaround plan is gaining traction.
U.S. Government Shutdown Takes Effect
The U.S. government ceased most operations Wednesday after a last-minute spending proposal supported by Republicans failed to pass the Senate due to Democratic resistance.
This marks the 15th federal shutdown since 1981 and the second under President Donald Trump, who has warned of additional layoffs. Tens of thousands of federal employees have already left this year, and more than 150,000 are expected to exit payrolls this week following buyouts—the largest departure in eight decades.
No immediate resolution is in sight, raising fears that this shutdown could exceed previous budget-related closures due to deep political divisions. The longest shutdown in U.S. history lasted 35 days from December 2018 to January 2019 over border security issues during Trump’s first term.
The shutdown is expected to delay the release of Friday’s September nonfarm payroll report, slow air travel, suspend scientific research, withhold pay for U.S. troops, and furlough 750,000 federal employees at a daily cost of $400 million.
Futures Slide Amid Uncertainty
Investors reacted sharply, with S&P 500 futures down 55 points (0.8%), Nasdaq 100 futures down 155 points (0.6%), and Dow futures off 295 points (0.6%) at 03:00 ET.
Despite the looming shutdown, major U.S. indices closed higher Tuesday, capping a strong September. The S&P 500 gained 7.8% for Q3.
Historically, markets have often performed well during government shutdowns, but this instance is particularly worrisome due to labor market concerns and the Trump administration’s plans for major payroll reductions.
The ADP private payroll report later in the session will be closely watched, alongside corporate results from Conagra Brands (NYSE:CAG).
Payroll Report May Be Delayed
A key impact of the shutdown is likely the postponement of Friday’s nonfarm payrolls release for September, a critical indicator of U.S. labor market strength.
Dallas Fed President Lorie Logan cautioned on Tuesday, “the labor market will need to deteriorate further for the central bank to consider more rate cuts.”
Recent data shows modest job openings growth in August but declining hiring, consistent with a softening labor market that could allow the Fed to cut rates once more this month. The ADP report is expected to indicate a 50,000-job increase in the private sector.
Nike Q1 Revenue Surprises
Nike (NYSE:NKE) captured attention with stronger-than-expected first-quarter results, signaling that CEO Elliott Hill’s turnaround strategy is gaining momentum despite China weakness and tariffs.
Quarterly profit exceeded Wall Street forecasts, driven by higher wholesale revenues, sending shares up over 3% in after-hours trading.
Nike now anticipates tariffs will cost $1.5 billion this year, up from an earlier $1 billion estimate due to production in countries such as Vietnam affected by U.S. duties.
“This quarter Nike drove progress through our Win Now actions in our priority areas of North America, Wholesale, and Running,” Hill said.
Gold Surges to New Highs
Safe-haven demand drove gold prices to record levels, with spot gold reaching $2,875.53 an ounce and December futures hitting $3,903.45/oz.
Political gridlock in Washington has weakened the dollar, further supporting precious metals. Platinum and silver also posted multi-year highs, hitting 12- and 14-year peaks.
Oil Stabilizes
Oil prices stabilized after recent losses as investors considered OPEC+ supply plans and the shutdown’s economic implications. Brent rose 0.4% to $66.29/barrel, and WTI climbed 3% to $62.58/barrel.
Earlier in the week, both benchmarks had posted their largest daily declines since August 1. Reuters reports that OPEC+ may raise output by 500,000 barrels per day in November, triple October’s increase.
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