**S&P 500 and Dow Reach Record Closing Highs Amid Government Shutdown and Rate Cut Expectations**

The S&P 500 and Dow Jones Industrial Average both achieved record closing highs on Friday, navigating a volatile trading session amid an ongoing U.S. government shutdown. Despite the uncertainty caused by the shutdown entering its third day, strengthened expectations for interest rate cuts bolstered investor sentiment.

Weak economic data, including a contracting services employment index, have driven traders to anticipate a Federal Reserve rate cut in October as almost certain, with another probable reduction in December. This outlook persists despite concerns over the potential economic impact of a prolonged government shutdown.

In Friday’s market action, the S&P 500 managed to edge out a record closing high, while the Dow also posted gains reaching new highs. However, the Nasdaq ended the day lower, weighed down by the technology sector. Shares of Applied Materials declined 2.7% after the chip-equipment maker forecasted a $600 million hit to its fiscal 2026 revenue late Thursday. Tesla’s shares also fell 1.4%, whereas utilities led gains among S&P 500 sectors, rising 1.2%.

The release of the U.S. nonfarm payrolls report for September was postponed due to the government shutdown, leaving investors focused on other data points. Notably, a survey from the Institute for Supply Management (ISM) revealed that the services employment index contracted for the fourth consecutive month. This persistent contraction supported the case for the Federal Reserve to implement additional interest rate cuts.

Mona Mahajan, head of investment strategy at Edward Jones, commented on the market’s recent momentum: “It certainly feels like momentum is on the side of investors over the last few days. The market probability of a Fed rate cut has actually gone up since the shutdown began.” She added, “That might be because of the potential impact on the economy or some weaker jobs data this week and this morning’s ISM data.”

As the government shutdown continues, investors remain cautious but are closely watching economic indicators and Federal Reserve signals. For ongoing updates on the market and expert investment advice, stay tuned to ETMarkets.

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https://economictimes.indiatimes.com/markets/stocks/news/dow-sp-500-manage-record-closing-highs-nasdaq-falls-in-volatile-session/articleshow/124301234.cms