Stocks closed higher yesterday, with the S&P making a new all-time high and close, and the Dow making a new all-time high close. While we didn't get a new all-time high or close in the Nasdaq or the small-cap Russell 2000, they too finished in the green and are within striking distance of their all-time highs as well.

The markets shrugged off the government shutdown, which began on Wednesday. No surprise, as the market has been essentially ignoring shutdown talk for weeks.

But, as I wrote yesterday, that's likely because shutdowns, historically, have had little impact on the market.

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. 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 usually lasted about 2-3 days.

During those shutdowns, the S&P averaged a gain of 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.

Of course, we'll have to see how long it lasts and what the impact is. But, so far, the markets have met it with a collective shrug.

Although, one impact of the shutdown will be a blackout on government reports, like the Employment Situation Report (which is/was due out on Friday), and the CPI and PPI inflation reports, which will be coming out later in the month. Those are produced by the Bureau of Labor Statistics (BLS).

In the meantime, the market will have to make due with non-governmental produced reports.

Yesterday's ADP Employment report was one such report. And it will have to tide us over until the BLS report comes back online.

The ADP report showed private payrolls shrinking by -32,000 vs. last month's downwardly revised -3,000 (originally reported as 54,000), and the consensus for 50,000.

The BLS report is/was supposed to show private payrolls at 60,000 (and the public sector -10,000).

But based on the ADP report, the expectation was looking like it would be a light BLS report. Although, it should be taken with a grain of salt given the ADP report has a spotty track record of predicting what the BLS will say. Nonetheless, it's looking weaker rather than stronger.

Of course, we won't know for sure until the shutdown is over. But, it's safe to say that the Fed, which had forecast two more rate cuts by year's end, will likely cut again when they meet on October 28-29, especially with their extra focus being on the labor market vs. inflation.

On the economic report front today, we'll get the Challenger Job-Cut report, as that's produced by a non-governmental agency. But we won't get Weekly Jobless Claims, or Factory Orders, as those two reports are compiled by the Department of Labor's Employment and Training Administration, and the Commerce Department's Census Bureau respectively. Due to the shutdown, those will not be released.

October is off to a good start. Even though it has a reputation of being one of the most volatile months, it typically ends higher.

And Q4 is considered the best quarter for stocks.

So, the odds are good for a nice end-of-year rally.

See you tomorrow,