U.S. Markets Rebound as Shutdown Deal Nears and Rate Cut Hopes Lift Sentiment

Index Update:  Last week, U.S. stocks declined as tech-led losses dragged markets lower, with the Dow down 1.21%, the S&P 500 falling 1.63%, and the Nasdaq plunging 3.04% amid concerns over inflated AI valuations. In corporate developments, Nvidia’s CEO urged TSMC to ramp up chip output to meet soaring AI demand, while Pfizer announced a deal to acquire Metsera for up to $10 billion, outbidding Novo Nordisk.

Market Movers:  On Friday, the top gainers were Motorsport Games Inc. (+70.78%), followed by Gulf Island Fabrication, Inc. (+49.68%). On the contrary Eledon Pharmaceuticals, Inc. (-49.76%), and Aimei Health Technology Co., Ltd (-42.66%) declined the most the same day.

Commodities Update:  WTI crude rose above $60 and Brent above $64 per barrel on Monday, ending a two-week decline as investors awaited market outlook reports from OPEC and the IEA. Prices had recently weakened amid expectations of excess global supply, with OPEC+ easing output curbs and U.S. production rising. Markets also tracked the impact of U.S. sanctions on Russian oil giants Rosneft and Lukoil, prompting China and India to diversify imports. Meanwhile, gold surged 2% to $4,080 per ounce, near a three-week high, on rising expectations of a Fed rate cut in December amid weak U.S. consumer sentiment, job losses, and the ongoing government shutdown. The Senate narrowly advanced a bill to end the shutdown, signaling progress toward resolution.

Macro Updates:  The record U.S. government shutdown appears close to ending, with moderate Senate Democrats backing a bipartisan deal to reopen the government, Bloomberg reported. The agreement provides full-year funding for key departments and temporary funding for others through January 30, while restoring pay and operations for federal workers. A Senate vote could occur as soon as Tuesday, with final approval expected later in the week. Leaders from both parties called the deal a vital step toward restoring government functions, though negotiations continue over border security and long-term budget issues.

Bonds Commentary:  The 10-year U.S. Treasury yield rose 3 basis points to 4.13% on Monday after the Senate advanced a bill to end the government shutdown, narrowly passing with bipartisan support. The deal funds key departments through January 30 but excludes extended ACA tax credits. Weak economic data, including a sharp drop in consumer sentiment and a surge in job cuts, fueled concerns about economic softness. Markets remain split on a possible Fed rate cut in December, with odds holding near 67% for a quarter-point reduction.

Futures Update

U.S. stock futures rose on Monday as progress in Washington toward ending the record government shutdown lifted sentiment. The Senate advanced a bill to fund the government through January 30, though final approval could take several days. Analysts said a smooth reopening and supportive Fed signals could revive risk appetite, especially in quality growth and AI-linked stocks. The rebound followed a weak week for Wall Street, where the Nasdaq logged its worst performance in over seven months. Dow, S&P 500, and Nasdaq futures gained 0.45%, 0.97%, and 1.49% respectively, while the VIX fell to 18.64.

After initially experiencing a sharp pullback during Thursday's session, stocks demonstrated a notable rebound throughout the trading day on Friday. The S&P 500 fell by 8.50 points, or 0.13%, and closed at 6,728.81. From a technical perspective, the index found support at key levels and gradually moved higher, indicating the potential for further gains in the near term. Additionally, the 14-day Relative Strength Index (RSI) is currently at the mid-point and trending upward, reflecting renewed buying momentum. Key support levels are around 6,666, with resistance expected near 6,820.