The Shutdown Catches up with the Stock Market as S&P 500 Plunges 2.71%
Stocks fell sharply on Friday as the government shutdown extended even further and was exacerbated by a Chinese-U.S. trade war.
Quick overview
- The S&P 500 fell over 2.71% as the government shutdown entered its second week, impacting the stock market significantly.
- The Dow Jones and Nasdaq Composite also experienced steep declines of 1.9% and 3.56%, respectively, due to the ongoing shutdown and trade tensions with China.
- Top-performing stocks like Nvidia and AMD faced sharp losses, with Nvidia dropping 4.89% and AMD falling 7.72% amid rising economic concerns.
- Analysts predict further declines in the stock market as worries over inflation and the prolonged government shutdown continue to escalate.
As the government shutdown extended deep into its second week, the lack of movement caught up with the stock market and caused the S&P 500 to fall more than 2.71% on Friday.
The Dow Jones index dropped a steep 1.9% on Friday, and the Nasdaq Composite fell 3.56% as a result of the ongoing government shutdown and President Donald Trump’s trade war with China. With tariffs expected to rise and the lack of government movement slowing down business, the stock market dropped off as the week closed off.
We expect Monday to start off with further decline as analysts and investors take stock of the economic situation and despair. Worries over rising inflation, not helped by the recent Federal Reserve interest rate cut, are likely to escalate, especially during this lengthy government shutdown.
Sharp Losses for Top Performers
As the market turned bearish, some of the best performing stocks in recent weeks were hit the hardest. Nvidia (NVDA), which has risen to record highs recently, felt the brunt of the market decline with a drop of 4.89% in stock value. Despite the company’s sky-high prospects at the forefront of the AI niche, their profits are most likely to be seriously affected by this economic downturn.
Their rival Advanced Micro Devices (AMD) was hit even harder by shifting investment interests and market fear. AMD stock fell precipitously by 7.72% on Friday, marking their sharpest decline in months and a significant downturn compared to their recent surge.
This is the case across the stock market for many previously high-performing assets. Many of them were near or at all-time highs and have now fallen sharply. They have not all lost their recent gains, but if this is the start of a lengthy bear trend, then those recent gains could soon disappear completely.
For the duration of the government shutdown, we have seen the stock market react very little, with indices that include the top three as well as the smaller Russell 2000 all climbed to near-record highs. It seemed inevitable that they would start to fall off if the shutdown continued much longer, and here we are. Investors should be prepared for further decline this week that will likely extend through the rest of the shutdown.
- Check out our free forex signals
- Follow the top economic events on FX Leaders economic calendar
- Trade better, discover more Forex Trading Strategies
- Open a FREE Trading Account
Save