The risk-off sentiment reflected investor unease over what analysts have warned could be a prolonged impasse.
Markets are leaning heavily into hopes of a dovish Fed policy to sustain the rally that led equities to their second straight quarter of gains yesterday.
“We would expect both the September employment report and next week’s CPI release to be delayed until after the government re-opens,” JPMorgan economists said in a note.
Shutdowns have not derailed markets historically – the S&P 500 rose during each of the last six government shutdowns, according to a note from Deutsche Bank – but the current one coincides with elevated stock valuations and a fragile mood.
Prolonged shutdowns also amplify risks. In the seven instances when they lasted 10 or more days, the S&P 500 fell four times and rose thrice, according to data from Vanguard.
At 6.56am, Dow E-minis were down 228 points, or 0.49%, S&P 500 E-minis were down 38.5 points, or 0.57%, and Nasdaq 100 E-minis were down 165.25 points, or 0.66%.
The nonfarm payrolls report, scheduled for release on Friday, will now likely be delayed.
That would be a setback for investors hoping for benign data to support a 25-basis-point Fed rate cut.
The ADP national employment report and the institute for supply management’s manufacturing PMI for September, slated for today, will likely be scrutinised for clues on the labour market as well as inflation whenever they are released.
The shutdown could also jolt the labour market if federal agencies resort to mass layoffs, as US President Donald Trump has vowed to do.
“Headlines about potential permanent layoffs linked to the shutdown add a low-probability, high-impact tail risk that could nudge unemployment higher,” said Daniela Hathorn, senior market analyst at online trading company Capital.com.
Additionally, investors will parse commentary from Federal Reserve Bank of Richmond president Thomas Barkin for any shift in tone as policymakers navigate an uncertain data landscape.
Nike was among the early movers, rising 3.9% in premarket trading a day after reporting surprise revenue growth in the first quarter.
NYSE-listed shares of Lithium Americas surged 31.4% after it said the US department of energy had taken a 5% stake in the company.
AES rose 13.7% after the Financial Times reported yesterday that BlackRock-owned Global Infrastructure Partners was nearing a US$38-billion deal to acquire the utility group.
Marvell Technology slipped 2.8% after TD Cowen downgraded the stock to “hold” from “buy”.
And GE Vernova declined 1.9% after RBC Capital Markets downgraded the power-equipment maker’s rating to “sector perform” from “outperform”.