Review & Preview: Risk Returns Amid Shutdown

Oct 08, 2025 18:01:00 -0400 by Megan Leonhardt | #Markets #Review & Preview

Day Eight. We’ve officially passed the one-week mark in the government shutdown. But investors continue to shrug off the funding lapse, perhaps because there have been few real-world disruptions so far.

That may change if President Donald Trump follows through with his threat to deny back pay to furloughed federal workers or if flight delays continue to rise. Remember, the record-breaking 35 day shutdown that ended in 2019 was resolved after just a handful of air-traffic controllers refused to show up for work.

For now, it’s a worry for another day. Today, the Nasdaq Composite closed up 1.1% and the S&P 500 was up 0.6%, putting both at record levels. The Dow Jones Industrial Average was flat.

The release of the latest minutes from the September meeting of the Federal Open Market Committee didn’t do much to move the needle for stocks—in part because there no real surprises.

As my colleague Nicole Goodkind put it in her report today, there were some hints that the market may get its two additional rate cuts this year, but it’s still far from a sure bet:

Minutes from the central bank’s Sept. 16-17 meeting, released Wednesday, show a committee wrestling with conflicting economic signals and struggling to reach consensus on which is the most pressing issue—stubborn inflation or a weakening labor market. The Federal Open Market Committee lowered the benchmark rate by a quarter percentage point to a target range between 4.00% and 4.25% during last month’s meeting.

In the minutes, Fed officials agreed that one rate cut was necessary in light of recent lackluster employment data. It was the path forward that created disagreements. Still, read the minutes, “most judged that it likely would be appropriate to ease policy further over the remainder of this year.”

In the latest summary of economic projections released at the conclusion of the meeting, 10 Fed officials signaled they saw two more rate cuts this year, while nine believed there should be one or fewer.

“The overall message appears to be that, although most participants are on board with further cuts, it probably won’t take much for the FOMC to take a slower approach than it indicated last month,” writes Stephen Brown, deputy chief North America economist at Capital Economics.

Company

Last

Chg

Chg%

Dow Jones Industrial Average

46,601.78

-1.20

-0.00%

S&P 500 Index

6,753.72

39.13

0.58%

NASDAQ Composite Index

23,043.38

255.02

1.12%

Market Data as of

The Hot Stock: Advanced Micro Devices +11.4%
The Biggest Loser: Fair Isaac -9.8%

Best Sector: Technology +1.8%
Worst Sector: Energy -0.6%

Created with Highcharts 9.0.1Wednesday, Oct. 8Index performanceSource: FactSetAs of Oct. 9, 4 p.m. ET

Created with Highcharts 9.0.1Oct. 9-0.8-0.7-0.6-0.5-0.4-0.3-0.2-0.100.10.2%Nasdaq CompositeS&P 500Dow industrials

Powell’s Potential Replacement Speaks Up

The next chair of the Federal Reserve has been a hot topic in Washington, D.C. since President Trump returned to office in January.

Now, the time for a decision is approaching, and the pick will have wide-ranging implications for the central bank.

My colleague Matt Peterson sat down for an interview with one of the top three contenders for the role, Kevin Warsh.

Warsh told Matt that the next Fed chair needs to overhaul the way the central bank thinks about its relationship with the markets, the economy, and the rest of the government:

Warsh would chart a new course that de-emphasizes the inflationary impact of factors such as supply chains and tariffs in favor of a view of inflation driven by government spending and the money supply. And he would cease what he sees as the Fed’s political interference in the rest of the government’s actions.

All of that makes questions about where Warsh would set rates more or less moot, in his mind. Markets would react to the newly credible Warsh Fed by lowering interest rates on their own.

In talking to Matt, Warsh ticked off a list of perceived flaws at Jerome Powell’s Fed: “Wrong track record, wrong operating framework, lack of curiosity, and lack of credibility.”

As a result, Warsh is calling for a “regime change” at the Fed. “We need to fundamentally rethink macro, which is a fundamental rethink of the core economic models that the Fed is using—rethink what is the core theory of inflation that the Fed is using, which I think is mistaken.”

He is also advocating that the Fed pull back on activities like banking supervision, saying other agencies can handle those tasks. Reforms to the Fed’s balance sheet operations would also be on the agenda if Warsh is ultimately nominated.

As investors anxiously await news of the next Fed chair, Matt’s story is vital reading.

The Calendar

Delta Air Lines, Levi Strauss, and PepsiCo report earnings tomorrow.

What We’re Reading Today

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