US stock futures drop, gold at record high

Both S&P 500 futures and Nasdaq futures declined 0.5% on Wednesday

US stock futures dropped, gold hit a record high on Wednesday as the U.S. government shut down much of its operations, possibly delaying the release of jobs data that could dampen the interest rate outlook.

With no clear path out of the impasse over a funding deal, agencies warned the government shutdown would halt the release of a closely watched September employment report, and lead to the furlough of 750,000 federal workers at a daily cost of $400 million.

Both S&P 500 futures and Nasdaq futures declined 0.5% on Wednesday. Gold prices jumped to $3,875 an ounce, hitting a record high for third consecutive session. European futures were little changed.

With Friday’s non-farm payrolls report absent, investors may place greater weight on the ADP National Employment Report due later today. Forecasts are centred on a modest gain of 50,000 private-sector jobs.

Typically, a shutdown is immaterial for markets. In fact, the 2018-2019 shutdown, which lasted for over a month, actually saw Wall Street rise, said Kyle Rodda, a senior analyst at Capital.com.

However, Rodda added the issues for markets are twofold, with one being the delay of release of the non-farm payrolls data. The other is U.S. President Trump has also threatened to permanently lay off workers, which could turn the shutdown into a mini-labour market shock.

Futures now imply a 96% probability of a rate cut from the country’s central bank in October, up from 90% from a day earlier, with almost a 74% chance of another move in December.

Anthony Saglimbene, chief market strategist at Ameriprise, said in a note that if the shutdown lingers, September inflation reports in mid-October could also be negatively affected.

An extended period where the U.S. Bureau of Labor Statistics is not operating at full strength could affect data collection efforts for other reports, which may impact the quality of the data, he said.