Traders at the New York Stock Exchange. New York AFP=Yonhap News. 

Despite the U.S. federal government entering a shutdown on the 1st (local time), major New York stock indices closed at all-time highs.

On this day, the Dow Jones Industrial Average finished trading at 46,441.10, up 43.21 points (0.09%) from the previous session.

The S&P 500 index rose 22.74 points (0.34%) to close at 6,711.20, while the tech-heavy Nasdaq Composite index climbed 95.15 points (0.42%) to 22,755.16.

With these gains, both the Dow and the S&P 500 indices set new record highs.

Investors weighed the expectation that, despite the commencement of the federal shutdown, its impact on the real economy would be limited, as has been the case historically.

In fact, past shutdowns have generally ended within one to two weeks, resulting in limited economic impact.

During the period from late 2018 to early 2019, which saw the longest shutdown in history (35 days), the economy experienced a temporary negative impact, but it recovered immediately following the shutdown's conclusion, and the effect on annual growth rates was negligible.

The New York stock market also generally showed strength during past shutdown periods, including late 2018.

However, investors are not ruling out the possibility that a prolonged shutdown could bring unexpected shocks to the economy.

The unexpectedly weak private employment data for September also fueled stock price gains by raising expectations for two additional interest rate cuts by the U.S. Federal Reserve (Fed) before the end of the year.

Automatic Data Processing (ADP), a U.S. employment information firm, announced on this day that private sector hiring in the U.S. fell by 32,000 in September compared to the previous month.

Even considering the downward adjustment of 43,000 due to revisions in employment statistics released by the Bureau of Labor Statistics, it raised concerns that the U.S. labor market is weakening.

Signalized by the softening of the private labor market in September, investors increased their expectations that the Fed would cut interest rates twice (a total of 0.50 percentage points) within the year.

According to the CME FedWatch tool on this day, the interest rate futures market reflected a 99% probability that the Fed would cut rates by 0.25 percentage points at the October Federal Open Market Committee (FOMC) meeting, and a 1% probability of a 0.50 percentage point cut.

The probability of a total of 0.50 percentage points in additional interest rate cuts before the end of the year, by the December FOMC meeting, was reflected at 88%. Just a day earlier, this probability stood at 77%.

Furthermore, market experts are raising concerns that a prolonged shutdown could increase uncertainty in financial markets by delaying the release of official government employment and inflation data.

Meanwhile, international gold prices broke through to another all-time high, driven by expectations of interest rate cuts and sustained demand for safe-haven assets.

In the New York Mercantile Exchange, the December gold futures contract closed at $3,897.5 per ounce, up 0.6% from the previous session. Gold futures have now risen for five consecutive trading days, setting a new record high in terms of closing price.

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