Early Friday futures skirmishing suggests Wall Street will try to finish the last trading day of a rotten month on a positive note.<\/p>\n
A surge in Treasury yields to 16-year highs \u2014 partly from fears that oil-induced inflationary pressures will make the Federal Reserve keep interest rates higher for longer \u2014 has left the S&P 500
\n SPX
\n down 4.6% in September.<\/p>\n
Unfortunately, October may not get off to a great start either. Because unless an unlikely budget deal is struck in Washington in the next few days, the U.S. government will shut down on Sunday.<\/p>\n
The question for investors is what does that mean for markets. A research team at Citigroup, led by David Glass, has looked at what occurred to various assets during and after previous shutdowns.<\/p>\n
First thing to note is that Citi thinks a shutdown is likely, but may be short. Still, as millions of government employees aren\u2019t paid, and with discretionary government spending comprising about 1.9% of gross domestic product, the shutdown could trim GDP by 0.1 of a percentage point per week.<\/p>\n
However, if the government reopens relatively quickly that impact to growth would likely swiftly reverse, as retroactive wage payments are disbursed, says Citi. But the market as a whole may not get off so lightly as heightened uncertainty, amid a dearth of official data, causes volatility to spike.<\/p>\n
As the chart below shows, when a long shutdown occurs the CBOE VIX index <\/p>\n Stock market performance depends on shutdown duration. \u201cEquities are not thrown off their unconditional rise around shutdowns, although longer ones tend to be anticipated with a several percentage point sell off into the event (as now) and a reversal after 10-15 days (note the average of the 3 \u2018long\u2019 shutdown is 23 days) a pattern that is not evident when we examine shutdowns of less than 5 days,\u201d says the Citi team.<\/p>\n Recent market performance suggests equities may be anticipating a longer shutdown this time, says Citi, \u201calthough this sell-off has not come in a vacuum with rising rates a distinguishing feature.\u201d<\/p>\n <\/p>\n Clearly, individual stocks with significant exposure to government are likely to underperform approaching any shutdown, before rallying once Washington re-opens, says Citi. But the weak relative performance has been more pronounced the longer any shutdown drags on. <\/p>\n Citi\u2019s screen of stocks with direct government exposure \u2014 on a market cap basis \u2014 has a top ten of Pfizer Citi notes that perceived safe havens may have a role during periods of Washington budget angst. \u201cUnsurprisingly, longer shutdowns typically pose more of a threat for risk assets. However, perhaps given the US-centric nature of such events, the dollar <\/p>\n As for gold In summary, Citi says: \u201cFor those wishing to hedge a prolonged shutdown, gold may be a better bet than the dollar and government exposed equities provide an interesting lens to view the political risks.\u201d<\/p>\n <\/p>\n U.S. stock-index futures YM00, NQ00, For more market updates plus actionable trade ideas for stocks, options and crypto,\u00a0<\/strong>subscribe to\u00a0MarketDiem by Investor\u2019s Business Daily<\/strong>.<\/strong><\/p>\n All eyes are on the August personal consumption expenditure index, released at 8:30 a.m. Eastern. The core PCE is among the Federal Reserve\u2019s favored inflation gauges, and as such equity and bond investors were hoping to see evidence that price pressures continue to ease. They are: the increase in the core annual PCE index fell from 4.3% in July to 3.9% last month.<\/p>\n Other U.S. economic data on Friday, include the September Chicago Business Barometer released at 9:45 a.m., followed at 10 a.m. by the final reading of September consumer sentiment.<\/p>\n Shares in Nike Tesla shares Nvidia\u2019s Mainland China\u2019s markets are now on holiday ahead of Golden Week. They reboot on October 9.<\/p>\n Apple, China met to discuss Beijing\u2019s crackdown on Western apps.<\/p>\n Musk\u2019s X: Why Linda Yaccarino took on the wildest job in Silicon Valley.<\/p>\n Dividend Aristocrats may shine again if the Fed causes another bad year for the stock market.<\/p>\n \u201cCurrent 50-day stock\/bond correlations are +0.26 and have averaged 0.32 over the last 10 days. We are well through the 2 standard deviation level. Stocks and bonds are trading much more in sync than is usual,\u201d says DataTrek.<\/p>\n <\/p>\n \u201cLonger spells of high stock\/bond correlations are\u2026quite bad for equity prices. The 2002 \u2013 present data shows only 2 such periods, but they are 2022 and right now,\u201d DataTrek added.<\/p>\n Here were the most active stock-market tickers on MarketWatch as of 6 a.m. Eastern.<\/p>\n Woman finds very rare Welsh fun guy\u2026.., sorry, fungi. <\/p>\n How rugby can help stop the NFL\u2019s \u2018tush push\u2019. <\/p>\n When baseball requires an emotional support alligator.<\/p>\n
\n VIX,<\/span>
\n a measure of equity angst, sees a consistent rise into the event followed by a slow dissipation, says Glass and his colleagues. Volatility in fixed income also tends to rise, but is usually relatively short-lived. In fact, the bank finds that overall shutdowns have relatively little impact on fixed income assets.<\/p>\n
\n PFE,
\n
\n Accenture
\n ACN,
\n
\n RTX
\n RTX,
\n
\n Honeywell
\n HON,
\n
\n Boeing
\n BA,
\n
\n Lockheed Martin
\n LMT,
\n
\n General Electric
\n GE,
\n
\n CVS Health
\n CVS,
\n
\n Northrop Grumman
\n NOC,
\n
\n and General Dynamics
\n GD,
\n
\n DXY
\n often tends to weaken both before and immediately after funding gaps commence,\u201d says Citi, (though as the chart below shows that is not the case currently) before quickly reversing losses upon a reopening.<\/p>\n
\n GC00,
\n
\n Citi notes there is a clear difference in price action around long and short shutdown episodes: \u201cThe precious metal weakens into and out of shorter shutdowns. Near longer shutdowns, however, gold range-trades into the event and then, as the shutdown persists with no clear resolution in sight, gold catches a bid, rallying around 2% on average and holding onto that strength in the ensuing couple of months.\u201d<\/p>\nMarkets<\/h2>\n
\n ES00,
\n
\n
\n
\n are higher as benchmark Treasury yields
\n BX:TMUBMUSD10Y
\n dip. The dollar
\n DXY
\n is lower, while oil prices
\n CL.1,
\n
\n climb and gold
\n GC00,
\n
\n rises.<\/p>\nThe buzz<\/h2>\n
\n NKE,
\n
\n are jumping more than 8% in Friday\u2019s premarket action after the athletic-gear giant posted results that beat expectations.<\/p>\n
\n TSLA,
\n
\n are up 1.5% ahead of an update next week on quarterly sales. and after the electric vehicle maker was sued for racial discrimination.<\/p>\n
\n NVDA,
\n
\n offices in France were raided in a cloud-computing antitrust inquiry.<\/p>\nBest of the web<\/h2>\n
The chart<\/h2>\n
Top tickers<\/h2>\n
\n
\n \n Ticker<\/p>\n<\/td>\n \n Security name<\/p>\n<\/td>\n<\/tr>\n \n \n TSLA,
\n \n Tesla<\/p>\n<\/td>\n<\/tr>\n \n \n NVDA,
\n \n Nvidia<\/p>\n<\/td>\n<\/tr>\n \n \n GME,
\n \n GameStop<\/p>\n<\/td>\n<\/tr>\n \n \n NIO,
\n \n NIO<\/p>\n<\/td>\n<\/tr>\n \n \n AMC,
\n \n AMC Entertainment<\/p>\n<\/td>\n<\/tr>\n \n \n TTOO,
\n \n T2 Biosystems<\/p>\n<\/td>\n<\/tr>\n \n \n NVOS,
\n \n Novo Integrated Sciences<\/p>\n<\/td>\n<\/tr>\n \n \n AAPL,
\n \n Apple<\/p>\n<\/td>\n<\/tr>\n \n \n NKLA,
\n \n Nikola<\/p>\n<\/td>\n<\/tr>\n \n \n PLTR,
\n \n Palantir Technologies<\/p>\n<\/td>\n<\/tr>\n<\/table>\n Random reads<\/h2>\n