Review & Preview: Déjà Vu All Over Again

Washington Down. Wall Street Up. The government shutdown dragged on into a new week, and with politicians playing the blame game, a near-term resolution seems unlikely. That still didn’t slow stocks down.

The S&P 500 gained 0.4% while the Nasdaq Composite added 0.7%, their 32nd and 31st record closes of 2025, respectively. Gold and silver hit record highs again on Monday too. One exception to the record run: the Dow Jones Industrial Average slipped 0.1% on the day, to its second highest close in history.

The moves aren’t all that surprising given how stocks have learned to shrug off Washington, D.C. drama, especially when so much else is going right.

“We’re in a self-fulfilling rally—earnings are strong and getting stronger, investors are shrugging off a lack of data, and even a government shutdown can’t shake their confidence,” writes Mark Hackett, chief market strategist at Nationwide. “Markets have a long track record of staying resilient through shutdowns, with longer disruptions followed by stronger rebounds. The labor market is in a holding pattern, but it’s not a red flag. And with half of the past decade’s returns typically coming in fourth quarter, the main story right now is momentum.”

The shutdown means a dearth of government data for now, and with earnings season not beginning until next week (more on that below), there was little else for investors to focus on, allowing equities to drift higher.

That means valuations are going up too. The S&P 500’s forward price-to-earnings ratio has expanded from 18 from 22.8 in just six months—the biggest increase since 2020—writes Callie Cox, chief market strategist at Ritholtz Wealth Management.

There are bargains to be found, however. When it comes to the S&P 500, “the average stock is cheaper than the index due to the record concentration among a small set of stocks, and that same dynamic holds for most major U.S. equity indices,” writes Brandywine Global Managing Director and Portfolio Manager Patrick Kaser.

It turns out the down time from the shutdown might be a stockpicker’s playground.

Company

Last

Chg

Chg%

Dow Jones Industrial Average

46,694.97

-63.31

-0.14%

S&P 500 Index

6,740.28

24.49

0.36%

NASDAQ Composite Index

22,941.67

161.16

0.71%

Market Data as of

The Hot Stock: Advanced Micro Devices +23.7%
The Biggest Loser: AppLovin -14.0%

Best Sector: Technology +1%
Worst Sector: Real Estate -1%

Created with Highcharts 9.0.1Monday, Oct. 6Index performanceSource: FactSetAs of Oct. 8, 4 p.m. ET

Created with Highcharts 9.0.1Oct. 8-0.4-0.200.20.40.60.81.01.2%Nasdaq CompositeS&P 500Dow industrials

Earn Your Keep

At first blush, it seemed like September was teed up to be a difficult month for markets. August had already booked impressive gains, inflation remained an issue, and stocks were expensive, just to name a few headwinds.

Yet all that really mattered was earnings: Rising expectations in defiance of typical seasonal trends helped stocks rocket higher last month, with the S&P 500 and Nasdaq Composite logging their best September in 15 years.

Now, earnings season is nearly upon us, with big banks on the docket for next week. That means the expectations will soon come face to face with real numbers, and the bar is high. As my colleague Paul LaMonica writes today, Wall Street is banking on 8% year over year growth. “What’s more, consensus estimates for profit growth actually rose from the start of the quarter. That’s the first time that analysts boosted their outlook during a quarter since the fourth quarter of 2021.”

Of course, enthusiasm around artificial intelligence is behind much of market’s rally, with Big Tech accounting for more than two-thirds of the S&P 500’s third-quarter gains. If profits deliver, that would go a long way toward making stocks’ winning streak justifiable—bolstering the bull case going forward.

More from Paul’s article:

“Mega-cap growth and tech continue to do the heavy lifting,” said Deutsche Bank chief strategist Binky Chadha in a report earlier this month.

Chadha is a bit more optimistic than his peers about the third quarter as well. He is forecasting earnings growth of 10.7% from a year ago, and he argues that other strategists have been “very slow to upgrade estimates after the Liberation Day cuts.” That could be a mistake “as the tariff fog lifted and macro data improved” in the third quarter.

Soon investors will find out if the adage “you get what you pay for” holds up.

The Calendar

McCormick releases earnings tomorrow.

The Federal Reserve Bank of New York releases its Survey of Consumer Expectations for September. Consumers’ expectations of 1-year inflation was 3.2% in August.

What We’re Reading Today

• Gold Price Nears $4,000. Why It’s Soaring—and How It Can Keep Going.
• U.S. Banks Missed Red Flags on Tricolor. Now, Their Losses Are Piling Up.
• Musk Tees Up a Teaser Video. Is Tesla’s Cheaper Model Finally Here?
• Klarna Stock Gets First Ratings After IPO. A Lot of Analysts Say It’s a Buy.
• Biotech Stocks Are Up. The Sector Is Looking Better Than It Has in Years.

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