Markets finished the week lower, with the Nasdaq Index posting its worst weekly performance since April as investors weighed data on manufacturing, employment, and consumer sentiment amid a government shutdown. The week began with Monday’s ISM Manufacturing Index declining to 48.7, marking an eighth straight month of contraction. A reading above 50 indicates the sector is expanding compared to the previous month while a reading below 50 suggests a contraction. By Wednesday, stocks recovered slightly following a stronger-than-expected ADP report showing private sector job growth of 42k compared to the 30K median forecast. The September number was also revised upwards from -29K to +3K. Meanwhile, the ISM Services Index rebounded to 52.4 from 50 a month prior, with mentions of tariff headwinds down sharply from prior months. By Friday, equities extended losses. The Consumer Sentiment index dropped to 50.3 – its second lowest reading since 1978. Separately, data released by the Fed showed consumer credit rising to $13.1B, suggesting households are increasingly relying on credit.
Economists closely track the economic health of the consumer given that consumer spending makes up about 70% of U.S. GDP. The ongoing government shutdown has delayed both the September and October jobs reports, making it increasingly difficult to gauge the health of the consumer. With fewer official data releases, investors have turned to corporate earnings and private surveys for insights. Meanwhile, the impact is beginning to show up in daily life with SNAP benefits reduced and the FAA forced to cut capacity at 40 airports last week due to unpaid air traffic controllers. Among corporate America, a mixed picture is emerging. Warby Parker pointed to weakness among lower-income shoppers, McDonald’s saw higher-income customers driving gains while lower-income traffic fell, and CAVA cited fewer visits from younger consumers. Wingstop noted softer demand among Hispanic, low-income, and some middle-income households across regions. While these headwinds could prove temporary, they highlight signs of potential strain beneath the surface worth monitoring.
Market Data
Morningstar Direct using Morningstar Indices