US stocks close at records as Dow and S&P climb, Nasdaq retreats
U.S. equity markets ended the session higher, with the Dow Jones Industrial Average and the S&P 500 closing at fresh records, while the Nasdaq Composite pulled back on weakness in major technology names. The trading day unfolded as the government shutdown entered its third day, and investors weighed softer signals from the services sector against expectations that the Federal Reserve could cut rates again in response to growing growth risks.
Key drivers behind the rally
Trade and policy expectations provided a backdrop for the broad advance in the Dow and the S&P 500. Investors priced in the possibility of further Federal Reserve rate cuts later this year, supported by data pointing to a cooling economy and a softer labor market. The market mood was also influenced by the ongoing government stalemate in Washington, which many traders view as heightening the appeal of defensive hedges and rate relief possibilities.
Notable movers and sector performance
Among notable individual moves, semiconductor equipment maker Applied Materials slid about 2.7% after it cut its 2026 revenue outlook by roughly $600 million. Electric-vehicle leader Tesla declined about 1.4% as concerns about growth trajectories persisted in the EV sector. On the other hand, the S&P utilities sector rose roughly 1.2%, signaling that investors sought steadier, dividend-oriented plays amid uncertain macro conditions.
ISM data, labor market, and rate-cut bets
In economic data, the Institute for Supply Management reported its September non-manufacturing (services) index showing the employment component remaining below the 50-point threshold for the fourth straight month. That reading points to a softening labor market, reinforcing the case for looser policy should growth slow further. Market participants interpreted the release as supportive of bets on additional Federal Reserve rate cuts, especially if the data corroborates a cooling economy and persistent political uncertainty.
Market breadth and trading activity
Breadth was positive on the day: advancers outpaced decliners on the New York Stock Exchange by about 1.72 to 1, while the Nasdaq saw a similar but slightly more modest edge at roughly 1.5 to 1. Total volume across the U.S. exchanges reached about 20.5 billion shares, above the 20-day average of roughly 19.0 billion, according to LSEG data. The breadth signals suggested a broad-based move, even as some heavyweight tech names pulled back.
Government shutdown context and investor sentiment
The market environment is complicated by the government shutdown, now in its third day. Edward Jones investment strategy chief Mona Mahajan commented that the shutdown has coincided with higher odds of Fed easing in the market’s pricing. While the ISM softness adds to the dovish tilt, she cautioned that any policy path remains contingent on ongoing data flow and the political process. Investors are weighing both the potential benefits of rate cuts and the risk that political paralysis could restrain economic momentum.
What to watch next
Looking ahead, investors will be keenly focused on fresh labor market data, upcoming inflation signals, and any new guidance from Federal Reserve officials about the pace and timing of potential rate reductions. The resolution of the government shutdown—whether through a funding agreement or continued stalemate—will also be a crucial factor shaping equity risk appetite in the weeks ahead. For now, the Dow and S&P’s record closes contrast with the Nasdaq’s softer tone, underscoring a nuanced market environment where defensive positioning and rate expectations coexist with a backdrop of political and economic uncertainty.
