U.S. stock markets staged a late recovery on Friday, erasing early losses as investors grew hopeful that the longest government shutdown in American history—now in its 40th day—is finally approaching resolution. The breakthrough came late Sunday when the Senate advanced a bipartisan continuing resolution (CR) in a 60-40 procedural vote, clearing the path for final passage on Monday and a potential reopening of federal agencies by midday if President Trump signs the bill.
Despite the daily gains, major indexes ended the week in the red. The Nasdaq 100 dropped 3.09 percent—its worst weekly performance since April—amid mounting worries over massive artificial intelligence (AI) spending and the heavy use of debt to fund it. The S&P 500 fell 1.63 percent, and the Dow Jones Industrial Average shed 575 points, or 1.21 percent.
Senate Deal Breaks the Logjam
The Senate vote hinged on support from 12 Democrats and one independent who caucuses with them, providing the 60 votes needed to overcome a filibuster. The CR will fund the government through January 30, 2026, and includes full-year appropriations for Veterans Affairs, Agriculture, military construction, and the legislative branch. It also guarantees a Senate vote in December on extending Affordable Care Act (ACA) tax credits—a key Democratic demand—without granting an immediate extension.
Eight Democratic senators were pivotal in crossing party lines:
- Sen. John Fetterman (D-PA): The outspoken freshman criticized his party’s strategy, arguing Democrats lacked leverage and highlighting the risk to 42 million Americans facing cuts to Supplemental Nutrition Assistance Program (SNAP) benefits.
- Sen. Angus King (I-ME): An independent, King warned that a prolonged shutdown would grant excessive power to the Trump administration, calling it a greater threat than expiring health subsidies.
- Sens. Catherine Cortez Masto and Jacky Rosen (D-NV): Both Nevadans emphasized the shutdown’s toll on military families, federal workers, and the state’s tourism industry, which loses an estimated $1 billion weekly.
- Sen. Dick Durbin (D-IL): The Senate Democratic whip cited the strain on unpaid federal employees, including understaffed air traffic controllers working 10-hour shifts six days a week.
- Sens. Jeanne Shaheen and Maggie Hassan (D-NH): The New Hampshire duo negotiated the deal, securing the December ACA vote and full funding for SNAP through September 30.
- Sen. Tim Kaine (D-VA): Representing over 140,000 federal workers, Kaine ensured provisions for backpay and protections against further layoffs during the CR period.
The House is expected to return this week to pass the measure and send it to President Trump’s desk.
Market Optimism Tempered by AI Concerns
Friday’s rebound was fueled by the shutdown progress and President Trump’s renewed promise of at least $2,000 in tariff-funded “dividend checks” to most Americans (excluding high earners). Nasdaq 100 futures rose 0.60 percent to 25,316 in early Asian trading on Monday.
Yet investor unease persists over AI investments. OpenAI’s CFO recently suggested government subsidies for the company’s borrowing, labeling AI “strategic.” Critics point to a growing gap between sky-high capital expenditures and near-term revenue, with funding increasingly reliant on debt and off-balance-sheet structures rather than cash flow. While the long-term AI story remains compelling, short-term expectations are being scaled back.
Earnings and Interest Rates
Third-quarter earnings season is winding down, with 88 percent of S&P 500 companies reporting. Roughly 80 percent beat earnings estimates by an average of 9 percent—stronger than the four-quarter average of 73 percent—while 74 percent topped revenue forecasts by 2.8 percent.
Markets are pricing in an 18-basis-point Federal Reserve rate cut at the December meeting, with about 85 basis points of total easing expected through December 2026.
Technical Outlook: Correction Risks Rising
Analysts using Elliott Wave theory view recent gains in both the Nasdaq 100 and S&P 500 as the final “Wave V” of a rally from April lows. A completed five-wave advance typically signals an impending correction.
- Nasdaq 100: Last week’s close below trendline support near 25,250 raises the odds of a deeper pullback. A sustained break under 25,000 would target 24,200–23,950 initially, with risks to 22,500. While above 25,000, the index could still climb toward 27,000.
- S&P 500: A drop below trendline support near 6,760 last week puts 6,650 in focus. Confirmation of a top at 6,920 would aim for 6,360–6,340, with downside to 6,200 possible. Holding above 6,550 keeps the path open to 7,000.
Looking Ahead
The shutdown’s end would restore critical services, pay federal workers, and reduce economic uncertainty. However, the tariff-dividend plan still requires congressional approval and sufficient revenue, leaving its future unclear. Meanwhile, AI spending scrutiny and technical warnings suggest markets remain vulnerable to further volatility even as political gridlock eases.