US markets recover despite early losses
United States (US) stocks rebounded from early losses on Friday to close mostly higher, buoyed by hopes that lawmakers are making progress toward ending the government shutdown.
For the week, however, the Nasdaq 100 fell 3.09% – its worst weekly performance since April – as artificial intelligence (AI) names remained under pressure. The S&P 500 declined 1.63%, while the Dow Jones shed 575 points or 1.21%.
Government shutdown breakthrough lifts sentiment
The US government shutdown, now in its 40th day, appears to be nearing an end after the Senate advanced the bipartisan continuing resolution (CR) in a late Sunday procedural vote, crossing the 60-vote threshold with 12 Democratic supporters (more than the needed 10).
This clears the way for final passage likely Monday morning (10 November), reopening the government by midday if President Trump signs promptly. The deal funds through 30 January and includes three full-year appropriations bills – Veterans Affairs, Agriculture and legislative branch – and guarantees a December Senate vote on Affordable Care Act (ACA) tax credit extensions, addressing progressive concerns without an immediate extension.
The breakthrough on the shutdown – combined with President Trump’s renewed pledge to deliver at least $2000 in tariff-funded dividend cheques to most Americans (excluding high earners) – has lifted Nasdaq 100 futures 0.60% to 25,316 in early Asian trading. While the reopening restores critical services and eases economic uncertainty, the rebate plan remains contingent on congressional approval and sufficient tariff revenue, leaving its timing and feasibility in question.
AI spending concerns persist
While some of the headwinds that weighed on markets last week have eased, this is unlikely to relieve investor concerns about AI spending versus payback, which intensified last week.
The backlash grew louder after OpenAI’s chief financial officer (CFO) suggested the US government should subsidise the company’s borrowing because AI is ‘strategic’. This unease is compounded by a funding mix increasingly financed through debt and off-balance-sheet structures rather than free cash flow. In short, the AI narrative remains strong over the medium term, but the widening gap between high capital expenditure (capex) and near-term revenue – coupled with heavy reliance on leverage – is prompting the market to rein in short-term expectations.
Earnings season update and rate outlook
This week, third-quarter (Q3) earnings taper, with reports due from CoreWeave, Cisco, Disney and Quantum Computing. With roughly 88% of S&P 500 companies having reported, about 80% have beaten Q3 earnings estimates (versus 73% over the last four quarters) by an average of 9%, while 74% have beaten revenue estimates (versus 64%) by an average of 2.8%.
The US interest rate market starts this week pricing in 18 basis points (bp) of cuts for the December Federal Open Market Committee (FOMC) meeting and about 85 bp of cumulative Federal Reserve (Fed) easing through to December 2026.
