Market Review: Stocks Rise, Bonds Fall as US Shutdown Nears End.
Expectations of a deal to end the longest US government shutdown have boosted risk appetite, leading to a rise in the stock market, while bonds and the yen fell.
S&P 500 and Nasdaq 100 contracts rose 0.4%, and the Nasdaq 100 index gained 0.6%. Senate Republican leader John Thune said an agreement is "coming" and planned a test vote on Sunday on a limited spending package that would end the 40-day government shutdown. A group of Senate Democrats is leaning toward voting to advance the package, provided final details are finalized.
Asian stock markets rose, with South Korea gaining. As sentiment improved, bonds fell, and the yield on the 10-year Treasury bond rose more than two basis points to 4.12%. The yen, a traditional safe-haven currency, fell 0.2% against the dollar.
While hopes for a deal may provide some relief, markets remain jittery after last week's sharp decline in technology stocks rekindled concerns about elevated valuations. Asian technology stocks, which have outperformed their US counterparts this year on optimism about AI progress in China, were particularly weak. The lack of new data to guide investors about the health of the US economy has also increased caution.
"The coming week will depend on whether the US government can arrange an end to the shutdown," Kyle Rodda, senior analyst at , wrote in a note to clients. Although Wall Street's rally late Friday night mitigated some of the negativity in the markets, "the move ultimately amounted to nothing more than putting lipstick on a pig, as the proverbial saying goes."
People familiar with the discussions said the record-breaking US government shutdown is nearing its end after a group of moderate Senate Democrats agreed to support a compromise to reopen the government and fund some departments and agencies for next year.
The House is scheduled to hold a procedural test vote on Sunday. If successful, the Senate will need the consent of all members to end the shutdown quickly. Any single senator can force a delay and a vote of several days. The House will then have to pass a bill to reopen the government, and Speaker Mike Johnson has said he will give lawmakers two days' notice.
Chinese assets will be in focus on Monday, after consumer prices unexpectedly rose 0.2% in October compared to a year earlier, as holidays boosted demand for travel, food, and transportation during the month. Factory-gate deflation also eased.
After US consumer sentiment fell to its lowest level in more than three years, the S&P 500 rose 0.1% on Friday, recovering from an earlier test of its 50-day moving average. A dollar indicator rose 0.1% in early trading on Monday.
Strategists at the Commonwealth Bank of Australia, led by Joseph Capurso, said in a note to clients that the dollar is likely to trade in a tight range for the time being. "Even if the shutdown ends this week, it will take some time for data to be released again. Several FOMC members have indicated they are reluctant to cut interest rates further until key economic data is released."
