Closing Recap

U.S. stocks finished broadly lower, extending recent declines as investors digested stronger-than-expected GDP and jobs data while keeping a wary eye on a looming government shutdown; energy was the lone bright spot, while healthcare slumped, the dollar rallied, and Treasury yields rose. In the currency markets, the U.S. dollar rallied on the back of strong economic data, with the DXY index climbing and pushing the EUR/USD pair down towards 1.1650, while the USD/JPY surged to near the 150.00 level.

Key Takeaways 

• Stocks Slide for Third Straight Day: U.S. equities continued their retreat, with the S&P 500 holding the 6,600 level as markets grow cautious ahead of today’s key inflation data. 
• Strong Economic Data: Final Q2 GDP was revised higher to +3.8%, and weekly jobless claims dropped, suggesting a resilient U.S. economy and potentially complicating the Fed’s easing path. 
• Government Shutdown Risk Looms: Concerns about a partial U.S. government shutdown are growing, with lawmakers at an impasse and just days until the deadline. Shutdown odds on Polymarket hit 76%.
• Dollar Surges on Strong U.S. Data: The U.S. Dollar is on track for its best two-day rally since July after another batch of strong economic data, including a big upward revision to Q2 GDP and a drop in jobless claims. 
• All Eyes on PCE Inflation Report: Market focus is now squarely on the release of the August Personal Consumption Expenditures (PCE) price index, the Federal Reserve’s preferred inflation gauge. 
• Gold Holds Steady, Oil is Flat: Gold prices settled with a minor gain, consolidating after its recent pullback, while crude oil prices finished the session unchanged. 
• Major Currencies Hammered by Dollar: The Greenback’s powerful rally sent EUR/USD tumbling below 1.1700, GBP/USD to its lowest level since early September, and pushed USD/JPY to a seven-week high near the 150.00 level. 
• Bitcoin Breaks Below $110,000: The cryptocurrency sell-off deepened, with Bitcoin falling over 3.5% to break below the key $110,000 support level as macro headwinds intensify.

Market Overview

U.S. equity markets opened sharply lower and, despite a mid-afternoon rebound attempt, finished with broad losses for a third consecutive day. Investor sentiment was weighed down by a combination of stronger-than-expected economic data and mounting concerns over a potential U.S. government shutdown next week. The S&P 500 held support around the 6,600 level but showed clear signs of buyer exhaustion after its recent record-setting run. 

Index	Last	Change	% Change
S&P 500	6604	-33.24	-0.005
Nasdaq	22384	-113.16	-0.005
Dow Jones	45947	-173.96	-0.0038
Russell 2000	2411	-23.94	-0.0098

The economic data released yesterday was surprisingly robust. The third and final estimate of Q2 GDP showed the economy grew at a much stronger +3.8% annualized rate, revised up from +3.3%. Additionally, weekly jobless claims fell more than expected, pointing to continued resilience in the labor market. While normally positive, this strong data in the current environment complicates the narrative for the Federal Reserve, potentially reducing the urgency for the aggressive rate cuts the market has been anticipating. 

Adding to the cautious tone is the political gridlock in Washington, D.C. With just days until the September 30th deadline, lawmakers are at an impasse over a funding deal, and the probability of a partial government shutdown has climbed to 76% on prediction markets. This uncertainty is prompting some investors to take profits. Energy was the only S&P sector to finish in the green, while Healthcare was a notable laggard, partly due to a new U.S. Commerce Department national security investigation into imported medical items.

Economic Calendar

The U.S. economic calendar yesterday was packed with data releases, highlighted by stronger-than-expected final Q2 GDP and an improvement in weekly jobless claims, which now puts the focus squarely on today’s PCE inflation report: 

• Q2 GDP (Final): +3.8% annualized (vs. +3.3% prior, +3.3% consensus). 
• Q2 Core PCE Price Index (Final): Revised up to +2.6% (vs. +2.5% prior). 
• Weekly Jobless Claims: Fell to 218K (vs. 238K consensus, 232K prior). 
• Durable Goods Orders (Aug, Revised): +2.9% m/m (vs -0.3% est). Core Capital Goods Orders: +0.6%.
• Goods Trade Balance (Aug, Advance): Deficit narrowed to -$85.5B (vs -$94.4B est).

The week culminates with the most important inflation report for the Federal Reserve. 

• 12:30 GMT – Canadian GDP (Jul) (Exp: +0.1% MoM). 
• 12:30 GMT – US Core PCE Price Index (Aug) (Exp: +0.2% MoM, +2.9% YoY). 
• 14:00 GMT – Final University of Michigan Consumer Sentiment (Sep).

Commodities, Treasuries and Currencies

Gold prices edged slightly higher, with the December futures contract gaining $3.00 (+0.08%) to settle at $1,771.10 per ounce. The metal found support from looming government shutdown risks and ongoing geopolitical tensions. Crude oil prices finished nearly flat after a volatile session. WTI initially sold off on news of increasing Iraqi supplies but rallied late in the day to finish down just $0.01 at $64.98/bbl.

Asset	Change	Unit	Last
WTI Crude	-0.01	USD/bbl	64.98
Brent	0.11	USD/bbl	69.42
Gold	3	USD/oz	3771.1
EUR/USD	-0.0081	USD	1.1656
USD/JPY	0.94	JPY	149.84
US 10-Yr Yield	+4.0 bps	%	0.04187

In the currency markets, the U.S. dollar index (DXY) rallied +0.57% to 98.40, benefiting from the strong U.S. economic data and its safe-haven appeal amidst the shutdown concerns. The U.S. Dollar was the dominant force in financial markets. This strength hammered its peers, sending EUR/USD tumbling 0.6% to below 1.1670. GBP/USD also suffered a sharp slide, falling 0.77% to 1.3343. The USD/JPY pair was a standout, finally breaking out of its long-term range and surging to a seven-week high of 149.78 near the big psychological level 150.00.

Treasury yields rose following the better-than-expected economic data, with the 10-year yield climbing 4 basis points to 4.187%. The bond market was also pressured by a poorly received 7-year Treasury note auction, which showed weak demand. Cryptocurrencies fell, with Bitcoin down -3.5% to below $110,000, as investors turned cautious ahead of tomorrow’s key PCE inflation data. The digital asset space continued its sharp sell-off. Bitcoin fell another 3.5%, breaking below the key $110,000 support level. The token has lost over 5% in the past seven days as macro headwinds from a stronger dollar intensify.

Looking Ahead 

The market’s main focus will now shift to this morning’s release of the Personal Consumption Expenditures (PCE) Price Index for August. This is the Fed’s preferred inflation gauge and will be the final major data point before the September 30th government funding deadline. The inflation reading will be critical in shaping expectations for future Fed policy. The high probability of a government shutdown over the weekend also remains a significant risk that could lead to increased volatility. Earnings season is largely complete, but any remaining reports will be watched for corporate guidance. Large EUR/USD options expiries are clustered between 1.1650 and 1.1700, totaling $3.2B. While the PCE data will be the primary driver, these levels could act as support or resistance zones and influence intraday price action.