Senate fails to avert a shutdown for 3rd time, plus Microsoft is a buy, portfolio manager says

Market Overview - Major stock indices are reaching all-time highs, driven by optimism surrounding AI developments, despite ongoing government shutdown discussions [1][22] - The Dow Jones Industrial Average increased by approximately 316 points, while the S&P 500 showed a slight gain of about 0.1% [1][2] - The NASDAQ experienced a minor decline of about 0.3%, indicating mixed performance across major indices [2][3] Sector Performance - Utilities sector has been performing well, hitting record highs, while healthcare has led the week despite not reaching record levels [5][6] - Consumer discretionary, technology, and communication services sectors are underperforming, particularly affecting the NASDAQ 100 [6][7] - Financials and energy sectors have shown strong performance, each up more than 0.75% [6][11] Government Shutdown Impact - The Senate's attempts to avert a government shutdown have failed, with both Democratic and Republican plans not reaching the required 60 votes [12][13] - The ongoing shutdown is causing a data blackout for the Federal Reserve, complicating monetary policy decisions as key economic reports, including the September jobs report, are unavailable [42][43] - The lack of government data is leading to reliance on private sector indicators, which suggest a slowdown in the labor market [67][47] Federal Reserve Outlook - The Federal Reserve is facing challenges in making policy decisions without the September jobs report, which is crucial for assessing the job market [43][44] - Despite the uncertainty, traders are pricing in a nearly 97% chance of a quarter-point rate cut at the end of October [47] - The Fed's ability to act may be hindered if the shutdown continues, as they rely heavily on accurate data for decision-making [61][62] AI Market Sentiment - There is ongoing discussion about the potential for an AI bubble, with some experts noting that while there are signs of frothiness, the technology itself is expected to drive productivity gains [64][65] - Jeff Bezos acknowledged the existence of an AI bubble but emphasized the long-term potential of AI technologies to transform businesses [64][66] - Analysts are divided on the implications of the AI hype, with some suggesting that it could lead to both positive and negative outcomes for investors [66][67] Company-Specific Insights - Microsoft is highlighted as a strong investment due to its robust commercial revenue from Microsoft 365 and growth in Azure cloud services, despite concerns over lower margins in the cloud business [90][92] - Adobe is viewed less favorably due to increasing competition from platforms like Canva and Figma, as well as threats from AI-native products that could erode its market share [98][100]