Wall Street opened on the back foot Tuesday, with the S&P 500 and Nasdaq modestly lower and the Dow little changed as traders priced in the growing likelihood of a federal funding lapse at midnight.
Communication services names led early decliners, while a handful of company-specific movers stood out. By about 10 a.m. ET, the S&P 500 was down roughly a tenth of a percent, the Nasdaq about a quarter percent, and the Dow hovered near flat.
Losses were concentrated in megacap platforms inside the communication services cohort, while some technology shares gained.
The political calendar is doing much of the work, funding for the U.S. government expires at 12:01 a.m. Wednesday if Congress and the White House cannot agree on a stopgap bill.
As of late morning, there was little evidence a deal would arrive in time, and agencies had been circulating contingency plans for shuttered operations and reduced staffing.
Markets have seen shutdown brinkmanship before, yet the timing into quarter end and ahead of key releases has sharpened attention.
Data blackout risk complicates the week
What happens to the flow of information matters as much as the politics. The Labor Department said the weekly jobless claims report would not publish during a shutdown, and other regular releases from Labor and Commerce would pause, including Friday’s September employment report.
That prospect raises the chance investors and policymakers will temporarily fly with fewer gauges on the dashboard. Even with Tuesday’s dip, equity performance into quarter end is broadly constructive.
The S&P 500 is on pace to notch its best third-quarter showing since 2020, helping the index log a second straight quarter of gains alongside the Nasdaq and Dow.
Seasonality is not a strategy, but a firmer third quarter has historically made a constructive setup for year-end positioning.
Under the surface, sector leadership reflected the day’s cross-currents. Communication services fell more than 1% early, dragged by declines in Meta and Alphabet.
Consumer discretionary and energy also slipped, while technology eked out a small gain and health care helped limit losses in the Dow.
Stock-specific headlines added noise, with Wolfspeed jumping after exiting Chapter 11 and Paychex under pressure after results. Breadth leaned negative on both the NYSE and Nasdaq, though the magnitude was mild.
The macro backdrop outside Washington offered a mixed signal set. Oil prices extended Monday’s slide on expectations that OPEC+ will approve another production increase and as crude exports from Iraq’s Kurdistan region resume.
Brent and West Texas Intermediate both dipped in early trading, easing some of the energy price pressure that built over the summer. A softer tape in crude can be a modest relief valve for headline inflation, though the link is rarely linear.
Bond markets were steady, with Treasury yields little changed in early trade as investors balanced shutdown risk against the potential for delayed data.
With fewer official signals on growth, inflation, and labor to parse if the government goes dark, rates volatility can rise around any alternative proxies that traders try to elevate in the interim.
Market focus later in the session will also swing to the day’s scheduled Fed speakers for any sign of how policymakers would navigate a gap in data.
The wrinkle this time is the possible interruption to core releases that anchor expectations for earnings, consumer momentum, and the policy path.
If a deal arrives quickly, risk appetite can recover as the quarter gives way to October. If the standoff lingers and critical reports go missing, price discovery may become choppier.
The final trading day of the quarter often brings its own technical flows as funds rebalance and managers tidy exposures. That can amplify intraday swings without changing the bigger story.
Heading into the afternoon, the tape suggested a market that is cautious rather than fearful, watching Washington and sizing up what it might mean for the next several weeks of data, earnings pre-announcements, and the early stages of the holiday spending season.
If the lights stay on in Washington, the calendar proceeds as planned. If they do not, the market’s next move may depend less on new information and more on the absence of it.
