Stocks closed modestly higher yesterday, ahead of what is likely to be a government shutdown, if Congress does not pass a spending bill(s) (or Continuing Resolution) by the end of day today.

Both parties have dug in. The President met with Congressional leaders of both parties on Monday. After the talks, Vice President Vance said "I think we're headed for a shutdown."

There's still all day today to work out a deal. We shall see.

But the market didn't seem to care. In fact, it was looking like a shutdown for weeks, and the market soared.

Since 1980, there have been 14 government shutdowns (10 if you exclude technical shutdowns, i.e., procedural delays, etc., that lasted less than 24 hours). The average length of those shutdowns is 9 days. Although, they have usually lasted 2-3 days. The longest one was in 2018/2019 and lasted 35 days. 1995/96 was next at 21 days. And 2013 was third at 16 days. Other than that, they've ranged from 1 to 3 days.

How did the market do during those shutdowns? The S&P averaged 1.69% (median of 1.1%). A full 9 of those 10 times was higher. Only decline was in October 1990, when it lost -3.60%. The government shut down for only 3 days. But recession fears had gripped the market, and stocks had been falling for months prior to that.

So, it's no surprise that the market has, so far, given shutdown talk a collective shrug.

But, of course, if we do have one, we'll have to see how long it lasts and what the impact is.

In other news, yesterday's Pending Home Sales Index rose 4.0% m/m vs. last month's -0.3% and views for 0.7%. The index itself came in at 74.7.

And the Dallas Fed Manufacturing Survey showed the General Activity Index came in at -8.7 vs. last month's -1.8 and estimates for -1.0. The Production Index was at 5.2 vs. last month's 15.3.

Today we'll get the Case-Shiller Home Price Index, the FHFA House Price Index, the Chicago PMI, and Consumer Confidence.

With one more day to go, September, which is considered the worst month for stocks, is on pace to notch a stellar month.

While October has a reputation for being the most volatile month, it generally finishes higher.

And Q4 is considered the best quarter for stocks.

It's been a spectacular year so far. And it looks like it could finish even better.

See you tomorrow,