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Stocks took a break from the recent rally. For the week, the S&P 500 Index was -0.3%, the Dow Jones Industrials -0.1%, and the NASDAQ -0.5%.

The energy, utility, and real estate sectors led the S&P 500 Index for the week, while the communication services, materials, and consumer discretionary sectors lagged.

The 10-year US Treasury note yield increased to 4.181% at Friday’s close versus 4.127% the previous week.

The August Personal Consumption Expenditures (PCE) Price Index showed little movement on inflation with PCE prices +0.3% month-over-month and +2.7% year-over-year.

Core PCE prices, which exclude the impact of food and energy prices, were +0.2% month-over-month and +2.9% year-over-year.

Negotiations to avoid a potential government shutdown should occupy headlines early in the week. The major economic datapoint for this week is the September Employment Report scheduled for release on Friday.

Strength or weakness in the labour market could be a key issue for the status of continued Federal Reserve rate cuts. CME Fed funds futures are projecting 0.25% rate cuts at the October and December FOMC meetings, but none for early 2026.

Seven companies in the S&P 500 Index are scheduled to report third-quarter earnings results this week. Third quarter S&P 500 Index earnings growth is forecast at 7.9% with revenue growth of 6.3%. Full-year 2025 earnings are expected to grow by 10.8%, with revenue growth of 6.1%.

In our ‘Dissecting headlines’ section, we look at current developments in the US government funding negotiations.

Dissecting headlines: Funding negotiations

No significant progress was made over the weekend on passing a continuing resolution to fund the government past 30 Sept.

President Trump is scheduled to meet with Congressional leaders on Monday to break the impasse. The Senate also returns to session on Monday to see what needs to be done with the House continuing resolution.

The House Republicans have a continuing resolution, but the Senate Democrats are holding out for additional healthcare and other subsidy funding.

The usual rhetoric will likely continue for another day or so to see if a deal can be completed. The Senate needs to approve a continuing resolution by Tuesday at midnight.

If not, the federal government will go into at least a partial shutdown to include government employee furloughs and reduction of services.

There have been 21 federal government shutdowns since the modern budget process started in 1976. The average shutdown has lasted just moer than seven days. The shortest in early 2018 lasted only overnight, and the longest in late 2018 to early 2019 lasted 35 days. In either case, the drama fades quickly, and the government gets back to business.

While investors do not like uncertainty, these occurrences have become an expected part of the budgeting process and, once resolved, quickly becomes a distant memory.

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