On Friday, U.S. equities pushed to fresh records even as the government shutdown delayed key economic reports — the S&P 500 and Dow both notched all-time highs during the week. The rally has broadened beyond mega-cap tech: small-caps and cyclicals have also recovered, and defensive sectors such as utilities gained on hopes of more data-center power demand.
Drivers: the market is pricing easier monetary policy, strong corporate earnings in pockets (notably AI-linked hardware and software), and the view that past shutdowns mostly produce only temporary economic disruptions. That optimism is behind stretched valuations: several analysts warn that headline indices look expensive relative to profits, raising sensitivity to any growth or Fed-policy disappointments.
Risk signals are mixed. On the one hand, credit spreads remain contained and flows into index ETFs are strong — signs of broad investor confidence. On the other, private payroll figures and other non‑government series hint at cooling hiring; without official BLS data, traders are leaning on imperfect substitutes and positioning is more vulnerable to surprises.
Market implications: traders are increasingly betting on multiple Fed cuts and are rewarding companies tied to AI and durable spending, while rotation into cyclicals and small caps suggests risk appetite has widened. If earnings season fails to deliver or inflation surprises upward once official data returns, the current advance could reverse quickly.