S&P futures declined slightly early Wednesday as investors evaluated the implications of the U.S. government shutdown. S&P futures and Nasdaq 100 futures experienced declines of 0.44% and 0.51%, respectively. Futures associated with the Dow Jones Industrial Average declined by 192 points, representing a decrease of 0.41%. The U.S. government experienced a shutdown at 12:01 a.m. Wednesday, following two unsuccessful attempts by the Republican-controlled Senate to pass a temporary spending bill on Tuesday. Democrats aim to leverage the measure to formalize an extension of health care tax credits for millions of Americans. On Tuesday, the U.S. Securities and Exchange Commission informed its employees to brace for a possible funding interruption. President Donald Trump characterized a government shutdown as “probably likely” and criticized Democrats, stating, “I didn’t see them bend even a little bit.” Legislators attributed the stalemate to one another.

The stock market has historically navigated past government shutdowns with relative ease; however, the current situation may present greater risks due to a multitude of economic variables in consideration. Investors continue to express apprehension regarding a decelerating labor market and the potential risks associated with inflation, alongside historically high stock valuations and significant market concentration levels. The nonpartisan Congressional Budget Office estimated Tuesday that the shutdown will lead to the furlough of approximately 750,000 federal employees. Over the weekend, Trump issued a warning regarding potential mass firings of federal employees in the event of a shutdown. The current market sentiment appears to be centered on the duration of the shutdown, as an extended closure may hinder the release of critical economic indicators prior to the Federal Reserve’s upcoming meeting in late October. The Labor Department announced on Friday that it will cease nearly all operations, indicating that the nonfarm payrolls report for September will not be published at the week’s conclusion. In the absence of jobs data, the forthcoming report on private sector job creation from payroll processing firm ADP on Wednesday morning is anticipated to gain increased importance.

“The absence of government data, particularly the crucial BLS jobs report scheduled for release on Friday, raises concerns given that it coincides with a recent trend of labor market weakening, which prompted the Federal Reserve to lower interest rates just a few weeks prior,” stated Mark Luschini. “If past is prologue, however, these shutdowns typically conclude relatively swiftly and occur without significant disruption to equity prices,” he continued. “In the interim, investors will rely on additional data to support the assertion that the job market and the economy remain stable.” Indeed, equities dismissed concerns associated with this shutdown, as major U.S. indexes concluded higher on Tuesday, thereby marking an exceptionally robust trading month in September. The third quarter, which concluded on Tuesday, recorded a gain of 7.8% for the S&P 500.

The stock market generally experiences gains in the context of government shutdowns. According to Raymond James, historical data indicates that stocks have generally experienced an increase during the last five government shutdowns, with the S&P 500, MidCap 400, and Small Cap 600 all achieving gains exceeding 3% during those intervals. Separately, shares of Nike experienced an increase of over 4% in after-hours trading on Tuesday, following the sneaker giant’s unexpected outperformance in earnings and revenue expectations for its fiscal first quarter.