- US equities surge as the optimism regarding government reopening lifts risk sentiment.
- AI stocks lead the gains, while health stocks struggle amid exclusion in the government reopening bill.
- Markets remain eager to watch the NFP and CPI data that were delayed due to shutdown.
US equities extended gains on Monday as the optimism mounted that the US lawmakers are close to end the longest government shutdown in history. Investors fled to risk assets, with major indices and AI bellwethers soared sharply. Meanwhile, bonds slipped as safe-haven demand eased.
The S&P 500 gained more than 1.5%, marking best daily performance since late May. Meanwhile, Nasdaq Composite surged 2.25% and Dow Jones rose 0.8%. AI and semiconductor equities led the rally with PHLX Semiconductor index up by 3%.
The Senate advanced a bill on Sunday to reopen the federal government with 60-40 vote split, which removed the major overhand that had deteriorated the sentiment for weeks. The deal would restore the federal operations and reverse a massive layoff. However, the Affordable Care Act subsidies have been deferred until December.
Nvidia (NVDA) rallied 5.8%, Palantir (PLTR) gained 8.8% and Tesla (TSLA) rose 3.7%, providing adequate boost to the Nasdaq. Microsoft (MSFT) gained 2%, ending the longest losing streak since 2011. According Ross Mayfield, an analyst at Baird, “This is a rebound after being slightly oversold last week. There’s nothing structurally wrong with the AI theme, earnings remain robust.”
Elsewhere, Eli Lilly (LLY) hit a record top after analysts’ upgrade, while health insurers like Humana (HUM) and Centene (CNC) dropped after the shutdown deal excluded the extension of healthcare subsidy. Airline stocks remained mixed, with American Airlines (AAL) dropped 2.5%, and United Airlines (UAL) down by 1.3% amid continued flight disruption due to reduced staffing.
As reported by CNBC, Tim Holland, Chief Investment Officer at Orion, said, “The end of the shutdown removes one of three major headwinds for risk assets. Combine that with resilient corporate earnings roughly 83% of S&P 500 companies beating estimates, and seasonal strength, and the case for a year-end rally looks intact.”
Globally, the optimism expanded into Asia, with Japan’s Nikkei 225 and South Korea’s KOSPI gained more than 1%. Meanwhile, Bitcoin held ground, supporting the crypto-linked stocks like Coinbase and Robinhood.
Analysts now expect the delayed US economic data like NFP and CPI to be released once the shutdown is over, providing fresh insights to Federal Reserve ahead of December meeting.
