No shutdown bold makes blood run cold

The past week once again brought good news for investors. Despite plenty of reasons for at least a minor correction, market participants ignored them and continued driving prices to new record highs. As a result, all major U.S. indexes renewed their all-time peaks: the Dow Jones (DJIA-30) and S&P 500 each rose by about 1.1%, while the NASDAQ Composite gained 1.32%.

Interestingly, the main stars of the week were not the big technological names, as NASDAQ might suggest, but pharmaceutical companies. It was not only industry leaders such as Eli Lilly (LLY) and Pfizer (PFE) that performed well – the entire healthcare sector showed strong momentum. The average weekly gain across medical stocks exceeded 6.5%, more than double the growth recorded by the technology sector (+2.71%) over the same period. The main driver of this rally was Pfizer’s agreement with President Trump to strengthen cooperation, reducing drug prices in exchange for lower tariffs on medicines imported into the U.S. from Pfizer’s foreign production sites. Investors believe this is only the beginning, and that other leading pharmaceutical firms might follow the same path.

Another significant event last week has so far been largely overlooked by investors, even though its potential consequences could be quite serious. Since October 1, the government has been in a so-called shutdown after Republicans and Democrats failed to secure enough votes to pass a funding bill. For now, markets appear unconcerned, but the first signs of disruption have already emerged. The Labor Department’s September employment report was not released on Friday due to the shutdown. As a result, investors had to rely on alternative data, including reports from the Institute for Supply Management (ISM) and PMI S&P Global. Both pointed to a slowdown in the U.S. services sector.

This raises an important question. Will the data-dependent Federal Reserve have enough information about the U.S. economy to make a sound decision on interest rates at its next FOMC meeting at the end of October?

If healthcare and pharma were last week’s winners, the biggest losers were oil stocks, which fell by nearly 3% on average. However, the sell-off in the oil sector was quite logical, as crude prices fell by more than 7% over the week. The trigger was OPEC+’s decision to further increase production. Although the rise is moderate, it sends a clear signal to the market that producers are ready to bring more oil to market. Meanwhile, output from non-OPEC+ countries such as the U.S. and others remains high, adding to global supply. On top of that, some OPEC+ members have already begun easing their voluntary production cuts, further boosting output.

Considering all these factors, it has strengthened market expectations of an oil surplus in the coming quarters, prompting active selling. Investors should therefore remain highly cautious with oil and energy stocks and avoid rushing to buy the recently cheaper assets.

Overall, the market environment remains mixed but relatively calm. Investors are still willing to push the market higher, and the upward trend is likely to continue for some time. Still, it is worth remembering that the higher the climb, the harder the fall.

 

 

Market outlook for October 6, 2025

This week is the last one before the semi-official start of the new earnings season, which will, as usual, kick off next Tuesday, October 14, with reports from the major U.S. banks. That is the key date investors are now preparing for. Until then, the market will stew in its own juices, with little real significance expected in the coming days.

The main event this week will be Wednesday’s release of the minutes from the Federal Reserve’s September FOMC meeting. These reports always attract strong attention, and a surge in volatility following their publication is almost certain. Still, investors shouldn’t expect anything dramatic from the minutes – most likely, it will just spark another short-lived bout of speculative activity.

Although the official start of the earnings season is scheduled for October 14, several notable reports are due this week as well. The most anticipated is from Delta Air Lines (DAL), one of the leading U.S. airlines. Investors will also be watching the third-quarter 2025 results from PepsiCo Inc. (PEP), the global leader in the soft drinks market.

There will also be some intrigue in China, where markets reopen after a week-long national holiday. It will be interesting to see how Chinese investors react after such a long break.

In a nutshell, no major drama is expected this week. Investors are likely to stay cautious and adopt a wait-and-see approach ahead of the new earnings season. Market movements should remain limited, and few will be in a hurry unless unexpected news emerges that could strike things up.