Stocks close higher, despite looming government shutdown
The federal government is inching closer toward a possible shutdown.
Stocks closed slightly higher on Tuesday, even as the federal government heads closer to a possible government shutdown late Tuesday.
The Dow Jones Industrial Average closed up 81 points, or 0.1%, while the S&P 500 jumped 0.4%. The tech-heavy Nasdaq increased 0.3%.
The potential shutdown is set to arrive at a delicate moment for the nation's economy, as a hiring slowdown stokes recession fears and inflation proves difficult to fully contain.
Top congressional leaders met with President Donald Trump at the White House on Monday afternoon in a last-ditch effort to avert a government shutdown. But as a stalemate persists, a shutdown seems nearly inevitable barring an unexpected breakthrough.
A government shutdown typically risks only modest damage for the U.S. economy, stemming mainly from furloughed public workers, who temporarily lose out on pay and put a dent in U.S. consumer spending, analysts previously told ABC News.
The impact of a shutdown could be more significant this time around, however, since the wobbly economy may strain under the weight of a potentially prolonged interruption, while a halt in the release of key economic data could make it more difficult for policymakers to steer the economy, they added.
Each week of a potential government shutdown would reduce annualized real gross domestic product growth in the quarter by about 0.1%, Mark Zandi, chief economist at Moody's Analytics, told ABC News in a statement.
For reference, the economy grew by an average annualized rate of 1.8% over the first half of 2025, meaning it would take several weeks of a government shutdown for notable damage to be incurred.
Typically, lawmakers resolve government shutdowns quickly. Since 1977, the U.S. government has failed to meet a funding deadline on 20 separate occasions, posting an average shutdown length of 8 days, the Bank of America Institute, or BAI, said in a memo on Monday. However, the most recent shutdown – which took hold in 2018, during Trump's first term – lasted far longer than average, clocking in at 35 days.
On Monday, the U.S. Department of Labor said some data would not be released in the event of a shutdown, including the highly anticipated monthly jobs report set to come out on Friday.
The Federal Reserve, which opted to cut interest rates earlier this month, is guided by a dual mandate to keep inflation under control and maximize employment. Fed Chair Jerome Powell said a sharp cooldown of hiring over the summer had shifted the balance of risks toward greater concern over the labor market rather than inflation.
Still, Powell voiced concern about the trajectory for prices, saying, "Uncertainty around the path of inflation remains high."
In the event of a shutdown, central bankers will still avail themselves of private sector data sources, but a loss of some federal data would make their task more difficult, Marc Goldwin, senior vice president and senior policy director at the Committee for a Responsible Federal Budget, told ABC News.
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