The US government shutdown entered its second day with no signs of resolution in sight. However, on Thursday, the three major US stock indices continued their upward trajectory and hit fresh record highs, as investors continued to chase gains driven by artificial intelligence concepts and leading technology stocks.
The S&P 500 index rose marginally by 0.06% to close at 6,715.35 points, reaching an intraday high of 0.3% and setting a new intraday record. The Dow Jones Industrial Average gained 78.62 points, up 0.17%, to close at 46,519.72 points. The technology-heavy Nasdaq Composite Index showed the strongest performance, rising 0.39% to close at 22,844.05 points, also setting a new all-time high.
The biggest driver of market gains remained AI leader Nvidia, which surged to new record highs on Thursday. Investors continue to heavily buy into this AI giant, demonstrating undiminished enthusiasm for the technology growth sector.
Additionally, Chinese concept stocks and related ETFs showed broad strength. The Direxion Daily FTSE China 3X Bull ETF (YINN) rose 2.68%, the iShares MSCI China ETF (MCHI) gained 1.12%, the Nasdaq Golden Dragon China Index (HXC) increased 1.06%, and the Solactive China Technology Index (DRAG) climbed 1.64%.
Despite the strength in US equity markets, potential risks have not disappeared. Treasury Secretary Scott Bessent stated bluntly that the current government shutdown could impact gross domestic product (GDP), with longer shutdown periods creating more pronounced negative economic effects. His comments briefly sparked market concerns, as investors recognized that a prolonged government impasse would bring greater uncertainty to economic fundamentals and market sentiment.
Historically, government shutdowns have typically not caused lasting impact on financial markets. However, this shutdown occurs against a more complex backdrop: US equity valuations are already elevated with concentrated gains in AI sectors, creating a fragile market structure. Meanwhile, the US economy faces dual pressures from persistent inflation and a slowing labor market. Therefore, while markets continue rising in the short term, concerns about long-term trends are accumulating.
The current shutdown stems from Congress's inability to reach agreement on fiscal appropriations. Democrats insist on including extended healthcare tax credit provisions in the legislation, while Republicans refuse to compromise. President Trump indicated on Thursday that Democrats have provided him with an "unprecedented opportunity" to cut federal agency spending. He also hinted that if the shutdown continues, he might consider permanent layoffs for some federal employees.
Brian Mulberry, senior portfolio manager at Zacks Investment Management, noted: "Markets might tolerate a few days of shutdown, but if the government actually cuts agency departments, it would certainly bring short-term shock, though it might be viewed as a positive fiscal contraction factor long-term."
Due to the shutdown, the Department of Labor will suspend most operations, and the September non-farm payroll data originally scheduled for release this Friday will be delayed. For investors, this means a lack of key data to assess economic momentum in the short term, potentially amplifying market volatility.
Following ADP data showing private sector employment declines, investors widely expect the Federal Reserve to announce rate cuts at the October policy meeting. If economic impacts from the shutdown become more apparent, they could provide additional justification for rate cuts while simultaneously increasing policy uncertainty.
**Hang Seng and Hang Seng Tech Hit New Highs**
On October 2, the Hang Seng Index closed up 1.61% at 27,287.12 points, while the Hang Seng Tech Index surged 3.36% to 6,682.86 points, with both indices hitting stage highs. The Hang Seng China Enterprises Index rose 1.77%.
Semiconductor and chip sectors posted significant gains, with SMIC surging over 12% to lead blue chips and set new historical highs. ASM Pacific Technology, Hua Hong Semiconductor, and Solomon Systech all gained over 6%. Institutions cite accelerating domestic substitution trends in foundry services combined with warming global chip demand.
As global artificial intelligence investment increases substantially, AI servers are driving explosive growth in semiconductor demand for storage, with memory semiconductors expected to enter a "super cycle" of steady price increases over the next 2-3 years. HBM product demand in particular is showing exponential growth. Morgan Stanley projects the global HBM market will expand from $3 billion in 2023 to $53 billion by 2027.
Huaxin Securities notes that following DDR4 price increases, storage prices continue climbing as memory chips enter a new cycle. Additionally, the era of domestic AI chips has arrived, with China's AI industry chain achieving full integration from upstream advanced processes to advanced packaging, to downstream model acceleration and iteration upgrades by companies like ByteDance, Alibaba, and Tencent. The firm remains firmly optimistic about accelerated breakthroughs in domestic AI computing infrastructure.
Among Hang Seng Tech Index constituents, 23 stocks rose while 6 declined. Hua Hong Semiconductor jumped 7.13% as markets favor its specialty process capacity release. BYD Electronic gained 6.63% on consumer electronics industry chain recovery. NIO-SW climbed 6.62% after delivering 34,749 new vehicles in September, up 64.1% year-over-year for a monthly record. On the downside, Tencent Music-SW fell 2.06% amid intensifying competition in the online music industry.