The S&P 500 and Nasdaq Composite were back to their record-setting ways on Wednesday as the government shutdown entered its second week.
The S&P 500 was up 0.6%. The Nasdaq Composite was up 1.1%. The S&P marked its 33rd record close of the year, while the Nasdaq hit its 32nd closing high. The Dow Jones Industrial Average was flat.
The yield on the 2-year Treasury note was up to 3.58%. The 10-year yield was 4.13%.
Wall Street’s appetite for risk resumed following a brief detour on Tuesday. The Invesco S&P 500 High Beta ETF, which features the S&P’s riskier stocks, outperformed the broader market. Funds focused on growth, momentum, and small-caps were also in on the action.
Dividend stocks, value stocks, and low volatility stocks were among the laggards. At the sector level, the S&P’s energy, real estate, and consumer staples struggled, which explains why the Dow was behind the major indexes.
The top sectors were tech, industrials, utilities, and consumer discretionary. Despite some market commentators calling out froth, the artificial intelligence trade was rallying.
The government shutdown also means Wall Street hasn’t had to deal with government data releases that could conflict with the bullish view that lower interest rates and a somewhat resilient economy are in the cards. The dollar also continued to rise.
“The dollar bounce is likely to persist as long as its main drivers remain in place: lack of information about the US economy due to the Federal shutdown; concerns about the attraction of the euro because of its trade-weighted appreciation, worries about French politics and recent mixed economic data; and last but by no means least, fears of yen-unfriendly policies in Japan,” writes Kit Juckes, chief FX Strategist at Société Générale.
Minutes from the Federal Open Market Committee’s September meeting did little to challenge the market’s views. Traders see a 77.6% chance of a half-point in cuts through the end of the year and a 21.2% chance of just one more quarter-point cut, according to the CME FedWatch Tool. Odds of no cuts ticked up to 1.2%, compared to 0.7% on Tuesday.