U.S. stock market closes in the red as concerns rise over a government shutdown following the U.S. debt ceiling issue.

Yesterday, the three major U.S. stock indexes closed in the red, with the University of Michigan Consumer Sentiment Index falling to 67.7, marking the second consecutive monthly decline. The United Auto Workers (UAW) failed to reach an agreement with automakers, leading to a potential strike involving 150,000 workers for up to 45 days, potentially causing losses in the billions of dollars. Following the U.S. debt ceiling issue, there are now concerns about a possible government shutdown crisis!

Is the U.S. Government Likely to Temporarily Shut Down on 10/1?

The U.S. Congress must allocate funds to 438 government agencies by the end of the fiscal year on September 30. If lawmakers do not pass these bills before the start of the new fiscal year, some government agencies will not be able to continue normal operations. This means that if Congress does not approve spending bills by the end of September, certain government departments may face a temporary shutdown, and federal government employees may be forced to take unpaid leave.

According to a report by Reuters, the U.S. federal government has experienced 14 shutdowns since 1981, most lasting only a day or two. The most recent and longest shutdown occurred in 2018, lasting 35 days due to a security dispute at the U.S.-Mexico border.

The House of Representatives will end its recess next Tuesday, 9/19, and then engage in political debates over government spending cuts and the impeachment issue of U.S. President Biden. The White House Budget Office has urged Congress to pass short-term funding measures quickly to avoid a government shutdown at the start of the 2024 fiscal year on October 1.

Market Focus on 9/20 Rate Decision Meeting

The recently released Consumer Price Index (CPI) and Producer Price Index (PPI) have both risen due to higher oil prices. The market will shift its focus to the Federal Reserve's rate decision on 9/20, with investors generally believing that the Fed will not adjust its rate policy stance this time.

However, attention will be on Federal Reserve Chairman Powell's remarks at the press conference following the meeting to gather clues about the Fed's future policies.

According to data from CME FedWatch, the market generally believes that the Fed has reached the end of this rate hike cycle and may begin lowering rates by mid-next year. Goldman Sachs also believes that a prolonged U.S. government shutdown would impact the Fed's rate hike decisions.