MW The last thing the stock market wants right now is a government shutdown. Here's why.

By Joy Wiltermuth

Stocks are defying their typical weakness in September - but it isn't October yet

September could go out with a bang for investors.

Good news on the economy this week should be good for stocks over the long run. But any economic news at all might be welcome.

U.S. equities have performed well in September, despite it typically being a tough month for stocks. Yet a potential government shutdown now looks likely to hit midweek, right as investors will be closing out the month and quarter. Importantly, a shutdown could interrupt the release of September's all-important jobs report.

"This one could come at a really unfortunate time because we are supposed to get the jobs report on Friday," said Kevin Gordon, senior investment strategist at Charles Schwab. "If we don't get access to that data, it's going to be a problem."

There has been heavy scrutiny of labor-market data lately, especially after President Trump in August suddenly fired the commissioner of the Bureau of Labor Statistics after a poor monthly report, which also included downward revisions to data for several earlier months.

While all that suggests the U.S. economy has held up despite a glum job market, each fresh monthly labor-market report can bring on a bout of anxiety for investors. And this particular jobs report was pegged to be this week's showstopper already.

"At the moment, we view the government shutdown on October 1 as a high probability event, likely lasting long enough to delay release of the September jobs [report] and, likely, CPI releases, due out October 3 and 15, respectively," said Gary Schlossberg, global strategist at Wells Fargo Investment Institute, in emailed comments.

Furthermore, Schlossberg suspects any government shutdown this time could produce more extensive disruptions to data releases than "the partial shutdown in December 2018-January 2019, because more agencies will be affected by the lack of appropriations bills passed by Congress this time."

Without a stopgap budget, funding for federal government operations runs only through Sept. 30. After that, many operations and services would be halted.

The White House didn't respond when asked if a shutdown could delay Friday's jobs data. Past shutdowns over roughly the past decade have led to some delays of scheduled economic reports, but not all of them.

Schwab's Gordon said September's jobs report - whenever it might arrive - is expected to reflect weakened government payrolls from workers who accepted buyouts earlier this year.

Read: How badly could mass layoffs during a government shutdown hurt the stock market? Here's what experts say.

Any news is good news?

Major themes in the final days of September have been jitters around stock-market valuations, AI spending and Federal Reserve Chair Jerome Powell describing stocks as "fairly highly valued," in a speech.

Check out: The AI hype is starting to fade on Wall Street. Here's what investors need to know.

Some investors has been taking chips off the table when it comes to highflying megacap technology stocks driving AI spending, while buying lagging sectors.

"They are taking gains and deploying them elsewhere," said Gordon at Schwab, pointing to energy stocks being the winner of the past week, but lagging year-to-date. "That theme's very much alive."

As a proxy for megacap tech stocks, the Roundhill Magnificent Seven ETF MAGS was up 18.4% on the year so far, despite logging a 1% weekly loss on Friday, according to FactSet data. The S&P 500's energy sector XX:SP500.10 gained 4.7% for the week, but was up a more modest 7.5% on the year.

Garrett Melson, a portfolio strategist at Natixis Investment Managers Solutions, said he wasn't surprised by the weekly pullback for stocks after a "really eye-watering run" lately, nor fresh scrutiny from investors around AI spending.

Yet Melson sees investors as ready to buy the dip if opportunities arise, which could mean only shallow pullbacks for stocks. But he has been monitoring weakness in the housing market more closely, and thinks a lot will hinge on upcoming economic data releases since the economic backdrop looks "more cautious, but not terrible."

Schlossberg at the Wells Fargo Investment Institute argued that stocks and bonds during the longer government shutdowns of 2013 and at the end of 2018 were "largely reversed even before the government reopened as attention shifted to other market movers."

"We view the situation as likely to be little different this time, despite a more deeply divided Congress."

Stocks closed higher Friday, but the S&P 500 index SPX shed 0.3% for the week, the Dow Jones Industrial Average DJIA closed 0.2% lower and the Nasdaq Composite Index COMP fell 0.7%. The S&P 500's gain so far in September was 2.8%, while the Dow was 1.5% higher and the Nasdaq was up 4.8%.

On deck for Monday and Tuesday are a host of Fed speakers, housing data, a read on consumer confidence and jobs openings. There's more on the economic calendar for release later in the week, but Polymarket had the odds of an Oct. 1 government shutdown at about 74%, at last check.

Related: September is historically the worst month of the year for stocks. Why this time could be different.

-Additional reporting by Robert Schroeder

-Joy Wiltermuth

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September 28, 2025 12:00 ET (16:00 GMT)

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