Stocks Slip as US Shutdown Concerns Add to Risks

13 Mar 2025

Riyadh - Maaal

Nasdaq

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US stock futures dropped as concerns over whether lawmakers in Washington will avert a government shutdown at the weekend added to uncertainty around the outlook for the American economy, Bloomberg reported.

S&P 500 contracts slid 0.6% and those on the Nasdaq 100 fell 0.8%, after gains on Wall Street Wednesday spurred by a softer-than-expected inflation print. Europe’s Stoxx 600 index was little changed. Asian shares retreated.

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US Senate Democratic leader Chuck Schumer said his party would block a Republican spending bill to avert a government shutdown on Saturday and urged the GOP to accept a Democratic plan to provide funding through April 11 instead. The looming showdown adds an extra layer of worry for traders already confronting a higher unemployment rate, federal workforce job cuts and President Donald Trump’s escalating tariff war.

“The next hurdle is a potential US government shutdown this Saturday,” said Jim Reid, global head of macro research and thematic strategy at Deutsche Bank AG. “We will see if a deal can be made. The uncertainty has perhaps helped S&P and Nasdaq futures to give up their gains from yesterday.”

Treasuries edged higher as traders looked ahead to fresh US economic data later Thursday, with readings on wholesale inflation and initial jobless claims due. The dollar was steady. The yen strengthened after Bank of Japan Governor Kazuo Ueda said he expects real wages and consumer spending to improve.

The risk of a US government shutdown comes at a moment when financial markets are hyper-sensitive to new disruption. Two weeks of heightened market volatility have already inflicted losses for investors and pushed Wall Street strategists to cut their forecasts for US stocks, while the Federal Reserve has adopted a patient approach to interest-rate cuts.

“A timely pivot to tax cut package will be rather important for the market given investors’ poor mood on various tariff threats,” said Homin Lee, senior macro strategist at Lombard Odier. “So any legislative setback like shutdown that undermines such expectation could become an issue.”

Equity strategists have recently tempered their expectations about the US market. Goldman Sachs Group Inc. became the latest to sound the alarm, following those at Citigroup Inc. and HSBC Holdings Plc. Earlier this week, Citi downgraded US equities to neutral from overweight while upgrading China to overweight.

Growth Scare

The renewed volatility is because of “late realization by the markets that one soft CPI print may not change the Fed’s trajectory right away,” said Charu Chanana, chief investment strategist at Saxo Markets. “Growth scare at this point is a bigger concern that is not relieved, only enhanced, by a softening inflation print,” she said.

Still, some strategists think a bottom for US stocks is “probably” here. The worst of the US equity correction may be over, with credit markets indicating a lower risk of a recession happening, according to JPMorgan Chase & Co.

If US equity exchange-traded funds continue to see mostly inflows, “there is a good chance that most of the current US equity market correction is behind us,” JPMorgan strategists including Nikolaos Panigirtzoglou and Mika Inkinen wrote in a note.

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