Weekly Market Recap: Markets Start Q4 Strong Despite Washington Shutdown and Oil Slide

Market Overview

Major U.S. averages defied the historical September slump to close the month — and the third quarter — with solid gains. The S&P 500 advanced 1.1% for the week, while the Nasdaq climbed 1.3%. Healthcare and technology shares powered markets higher as investors shrugged off the first government shutdown in seven years.

Healthcare led weekly sector gains (+6.9%) after Pfizer secured a “most-favored-nation” pricing deal with the White House, sparking optimism that other drugmakers could follow suit. Technology stocks also rebounded, buoyed by OpenAI’s new partnerships and a deal valuing the firm at $500 billion, cementing its position as the world’s largest startup.

Internationally, European and Asia-Pacific equities followed Wall Street’s lead. European benchmarks posted their best September since 2019, driven by healthcare and tech strength, while South Korea surged nearly 5% on semiconductor momentum from OpenAI collaborations with Samsung and SK Hynix.

Federal Reserve Insights & Economic Roundup

Bond markets firmed as investors priced in increased odds of Fed rate cuts following weaker private payroll data. The U.S. Aggregate Bond Index rose modestly (+0.24%) as yields dipped, with the 10-year Treasury closing near 4.13%.

Behind the scenes, the Fed’s ongoing balance sheet runoff (QT) is nearing a key inflection point. The Fed’s overnight reverse repo (O/N RRP) facility has dropped to its lowest level since 2021, signaling that liquidity conditions are tightening. Once reserves fall toward $2.7–$3.0 trillion, quantitative tightening could end — potentially turning the Fed from a liquidity drainer back into a net bond buyer, supportive for fixed income markets.

Meanwhile, the economic calendar was thinned by the government shutdown, delaying crucial reports such as the monthly payrolls and jobless claims data. Private-sector numbers from ADP suggested slowing labor demand, bolstering the case for additional Fed easing before year-end.

Commodities & Currencies

Crude oil tumbled nearly 9%, marking its steepest weekly decline since June as OPEC+ production rose and refinery maintenance dampened demand. In contrast, gold surged for the seventh straight week, nearing $3,900/oz, as investors sought refuge amid political gridlock in Washington. Silver and copper joined the advance, while the U.S. dollar weakened modestly, reflecting softer growth expectations.

The Week Ahead

With the government shutdown continuing, key releases such as employment data may remain delayed. Scheduled reports include:

• Tuesday: Trade Balance (Aug), NY Fed Inflation Expectations
• Wednesday: MBA Mortgage Applications, FOMC Minutes (Sept 17)
• Thursday: Jobless Claims, Wholesale Trade Data
• Friday: University of Michigan Consumer Sentiment (Oct), Federal Budget Balance (Sept)

Investors will watch for signs of labor cooling and any updates from Washington that could shape fiscal spending expectations.