Markets Dip As Nasdaq Leads Losses; Shutdown Deal Offers Hope

Market Performance - Broad market indices ended last week lower, with the S&P 500 and Russell 2000 both losing 1.6%, and the Dow Jones Industrial Average falling 1.2%. Technology stocks were the largest losers, with the Nasdaq Composite down 3% [2] - Stocks managed to recoup losses on Friday after being down significantly early in the day, with the S&P 500 bouncing off a key support level at 6670 [3] Economic Indicators - The government shutdown may be coming to an end, which could salvage the holiday season despite the total damage from the shutdown still being assessed [3] - Third-quarter earnings are on pace to rise 13.1% year-over-year, significantly surpassing initial estimates of just under 8% [4] - Despite strong earnings growth, market valuations remain extended, with the S&P 500's 12-month forward-looking P/E ratio at 22.7, above its 5- and 10-year averages of 20 and 18.6, respectively [5] Employment and Consumer Sentiment - Layoffs are accelerating, and net job growth may be negative, contributing to a sharp drop in consumer sentiment, with the Michigan Consumer Sentiment index at 50.3, one of the lowest levels recorded [5] - The current employment situation is uncertain due to the government shutdown, but private estimates suggest job growth is at best anemic [5] Legislative Developments - The Senate is close to passing a resolution to reopen the government, which would require agreement from the House, raising concerns about potential delays [6] - A resumption of normal government functions would allow for better assessment of the broader economic picture, which is crucial for the Federal Reserve's interest rate decisions [6] - There is currently a 65% chance of a quarter-point cut at the next Federal Reserve meeting scheduled for December 10th, according to the CME Fed Watch Tool [6] Market Sentiment - Markets are optimistic about a potential deal in Congress, with equities trading higher by around 1% in the premarket [7] - If the legislation fails to pass, the 6670 level in the S&P 500 may be tested again [8]