publication
2025-10-08 22:13
The federal government shutdown doesn't seem to be bothering the financial world. New all-time records were set on Wall Street. Investors are convinced that the US central bank is on their side and will obediently lower interest rates.
It was another day of breaking all-time records by the largest New York indexes. The S&P500 gained 0.58% and reached 6,753.72 points. The Nasdaq Composite rose by 1.12% and reached 23,043.38 points. Both indices have set new highs once again this year. The Dow Jones remained virtually unchanged, at 46,601.78 points.
As usual, the rally on Wall Street was driven by shares of technology giants connected in the “AI spider web”. Nvidia shares rose 2.2% after CEO Jensen Huang said demand had picked up in recent months. Huang also confirmed the company's commitment to financing Elon Musk's artificial intelligence startup, xAI.
Broadcom by 2.7%, Oracle by 1.5%, and AMD by as much as 11%. However, it is worth noting that a large part of traditional businesses were “lit up” in red, led by banks and consumer companies.
– Everything related to AI attracts a larger share of the markets' attention – noted Bill Merz, head of Capital Market Research, quoted by Reuters.
Meanwhile, the Bank of England has publicly warned investors that high valuations of artificial intelligence companies have increased the risk of a sharp stock market correction. The whole situation is increasingly reminiscent of the Internet bubble at the end of the 20th century. The difference is that today's technology companies generate hundreds of billions of dollars in profits and revenues. But at the same time, they are sinking hundreds of billions into investments in computing centers that no one knows if they will actually be useful at all.
In the United States it was the eighth day of the so-called shutdown. The Senate has once again failed to pass an interim budget, leaving most federal agencies closed until further notice. And hardly anyone really cares about it at the moment. Opinions on this subject may change, however, if the government shutdown lasts longer than a month or two.
If the crisis does not end by the end of the week, it will mean that more than a million federal workers will not be paid on time. They receive their salaries on the 10th day of the month. The longest paralysis so far lasted 35 days and occurred at the turn of 2018 and 2019, also during Trump's presidency.
But for investors, the Federal Reserve is more important than the US federal government. The minutes of the September FOMC meeting show that the majority of policymakers support further interest rate cuts. The futures market estimates the chances of a 25-point cut in October at 92.5% and gives 80% to the scenario of another 25-point cut in December – according to FedWatch Tool calculations.
Meanwhile, inflation in the United States is approaching 3% and most forecasts do not assume it will drop to the Fed's 2% target soon. This means easing monetary policy in conditions of still elevated inflation. All this undermines confidence in the dollar and Tresuries, which in turn manifests itself in galloping gold prices. On Wednesday, more than $4,000 was paid for an ounce of the “barbaric relic” for the first time in history.
