Closing Recap

U.S. stocks finished broadly lower, extending their pullback from record highs as investors grew cautious amid a prolonged government shutdown, hawkish Fedspeak, and signs of political turmoil in Europe; the dollar surged on safe-haven demand, while gold plunged from its all-time highs. In the currency markets, the U.S. dollar surged for the fourth day straight, with the DXY index hitting a two-month high as risk aversion intensified, sending the Euro to an eight-week low on French political turmoil and the Japanese Yen tumbling to fresh multi-month lows. 

Key Takeaways 

• Stocks Fall on Broad Risk-Off: Major indices declined for a second day (S&P -0.3%), with the S&P 500 now in a three-day losing streak, as a confluence of negative headlines weighed on investor sentiment. 
• Government Shutdown Enters 9th Day: The ongoing U.S. government shutdown is beginning to erode market sentiment, with no clear path to a resolution, raising concerns about its economic impact and data delays. 
• Gold Plunges from Record Highs: Gold prices fell sharply by -2.4% in a wave of profit-taking, as a powerful rally in the U.S. dollar and some easing of immediate geopolitical fears provided headwinds. 
• Hawkish Fedspeak Weighs on Sentiment: Cautious comments from Fed officials, including Michael Barr, who warned about inflation risks and a cautious approach to rate cuts, tempered dovish expectations. 
• Safe-Haven Dollar Rally Intensifies: The U.S. dollar surged for a second day as a safe haven amid global political turmoil, with the Euro falling to an eight-week low below 1.1600 and the Japanese Yen tumbling to a new multi-month low above 153. 
• Yen Freefall Continues, Intervention Talk Grows: The Japanese Yen’s collapse has continued unabated, with USD/JPY breaking above 153. A former BoJ official has now warned that intervention could be considered if the pair approaches the 160 level.
• Bitcoin See Sharp Profit-Taking: Bitcoin prices pulled back below $120,000 as risk appetite soured and a wave of long liquidations hit the crypto market. 
• Oil & Yields Weaken: Crude oil prices and Treasury yields both declined as investors sought safety and worried about the impact of the shutdown on economic growth. 

Market Overview

After a historic six-month rally, a crack finally appeared in the market’s armor. U.S. stocks finished lower on Thursday, snapping a period of extreme complacency that had seen 32 straight days without a 1% move. U.S. equity markets opened at their highs but were unable to hold onto gains, experiencing a modest decline throughout the day amidst a backdrop of profit-taking and a confluence of concerning headlines. There was no single catalyst for the downturn; rather, a combination of factors appeared to weigh on investor sentiment. The market’s remarkable 35% rally over the past six months, which has pushed valuations to stretched levels, has left it vulnerable to any shift in the narrative. 

Index	Last	Change	% Change
S&P 500	6735	-18.61	-0.0028
Nasdaq	23024	-18.75	-0.0008
Dow Jones	46358	-243.36	-0.0052
Russell 2000	2468	-15.14	-0.0061

Yesterday’s session saw weakness in the market-leading technology sector, particularly in high-flying AI and semiconductor names, following a media report from The Information suggesting Oracle (ORCL) was facing financial challenges in renting out Nvidia chips. This news, combined with cautious commentary from notable investors like Paul Tudor Jones and Orlando Bravo about AI and market valuations, seemed to trigger a bout of profit-taking. 

With the government shutdown now on Day 9 and no end in sight, the market’s “buy everything” mentality gave way to a more sober assessment of risk. Despite the pullback, the major indices are still poised to close the week with gains, a testament to the powerful underlying bullish trend. While the market has largely ignored the shutdown thus far, the prolonged stalemate is beginning to raise concerns about its potential economic impact and the delay of key data releases. Economic data released yesterday was mixed, with rising consumer inflation expectations but a solid rebound in pending home sales.

Economic Calendar

The U.S. economic calendar is quiet today. The focus for the week is on the Canadian jobs report and the University of Michigan consumer sentiment data tomorrow. Today’s Major U.S. Releases:

• Canadian Employment Report for September University of Michigan Consumer Sentiment (Oct – Prelim) 
• German Industrial Production (Aug). 
• French Consumer Confidence (Sep). 

Commodities, Treasuries and Currencies 

Gold prices plunged, with the December futures contract down a massive $97.90 (-2.4%) to settle at $3,972.60 per ounce. The sharp drop was attributed to profit-taking after the metal hit a major milestone above $4,000, and a powerful rally in the U.S. dollar. Crude oil prices also fell, with WTI settling down $1.04 (-1.66%) at $61.51/bbl, pressured by easing geopolitical risks in the Middle East after Israel and Hamas reached an agreement on the initial phase of a peace plan. 

Asset	Change	Unit	Last
WTI Crude	-1.04	USD/bbl	61.51
Gold	-45.6	USD/oz	4024.9
EUR/USD	-0.0072	USD	1.1554
USD/JPY	0.43	JPY	153.11
US 10-Yr Yield	+1.5 bps	%	0.04146

The currency market is in the firm grip of a powerful U.S. Dollar rally for a fourth straight day, climbing 1.7% for the week, driven by a trifecta of global risk factors that are crushing its major counterparts. 

• EUR/USD: The pair has crashed to an eight-week low below 1.1600, losing over 0.5% as the political crisis in France deepens. The technical picture has turned decidedly bearish, with the price breaking below its 100-day moving average for the first time since March. A large $2.8B options expiry at the 1.1600 level could act as a ceiling to any attempted bounce today, with sellers now in firm near-term control. 
• USD/JPY: The Yen’s freefall continues, with the pair consolidating its gains above 153.00. The fundamental driver is the market’s belief that new PM Takaichi will pursue an “Abenomics 2.0” agenda, delaying any BoJ tightening. The speed of the move has now brought the prospect of FX intervention into focus, with a former BoJ official citing the 160 level as a potential trigger point. 
• GBP/USD: Sterling has been dragged lower by the dollar’s surge, falling towards the 1.3300 handle. While the pair is getting some support from hawkish BoE commentary, the overwhelming safe-haven bid for the dollar is the dominant force.

U.S. Treasury yields were higher, with the 10-year yield up 1.7 basis points to 4.148%, as a weak 30-year bond auction added to supply concerns. Cryptocurrencies fell, with Bitcoin dropping -1.7% to below $120,000 amid a wave of long liquidations.

Looking Ahead 

The market will be keenly focused on tomorrow’s Canadian employment report and the preliminary University of Michigan consumer sentiment data. The primary driver of sentiment, however, will remain the U.S. government shutdown. Any signs of a breakthrough in negotiations could spark a relief rally, while a continued stalemate will likely keep markets on edge. With Q2 earnings season largely complete, macroeconomic and political headlines will be the main determinants of market direction heading into the long weekend (U.S. bond market is closed Monday for Columbus Day).

After an eight-week winning streak, gold is facing its first significant test. The $4,000 level is now a key psychological battleground. A failure to reclaim it could signal a deeper correction, while a successful defense would reaffirm the powerful underlying bullish trend. The speed of the Yen’s decline is now the most critical issue in FX. While the 160 level has been mentioned, traders will be on high alert for any stronger “jawboning” from Japanese officials, which could trigger a sharp, albeit likely temporary, reversal.