NEW YORK – U.S. financial markets showed signs of volatility on Tuesday as the federal government shutdown entered its second week, with investors growing increasingly concerned about the economic impact of the prolonged political deadlock in Washington.
The S&P 500 dropped 1.2% in morning trading, while the Dow Jones Industrial Average fell 380 points, or 0.9%, as uncertainty over the shutdown’s duration weighed on investor sentiment. The technology-heavy Nasdaq Composite declined 1.5% amid broader market concerns.
Treasury Secretary Scott Bessent warned that the shutdown poses significant risks to economic growth. “I’m concerned about an impact on GDP and growth,” Bessent told reporters on Monday. “The longer this continues, the more severe the economic consequences become.”
Financial analysts estimate that the shutdown is costing the U.S. economy approximately $6 billion per week in lost economic activity. The Congressional Budget Office projects that if the shutdown extends beyond two weeks, it could reduce fourth-quarter GDP growth by 0.2 percentage points.
The government closure has already disrupted federal contracting work, delayed payments to millions of federal workers, and created uncertainty for businesses that rely on government services. Small businesses dependent on federal loans and grants have been particularly hard hit.
“We’re seeing real economic pain here,” said Jennifer Morrison, chief economist at Morgan Stanley. “Federal workers aren’t spending money, government contracts are frozen, and business confidence is eroding. If this goes on for another week or two, we could see a measurable impact on consumer spending.”
The bond market has also reacted to the crisis, with yields on 10-year Treasury notes rising slightly as investors factor in increased economic uncertainty. The dollar weakened against major currencies as foreign investors grew concerned about U.S. political stability.
With President Trump announcing permanent layoffs of federal workers rather than temporary furloughs, economists warn that the economic damage could be more severe than in previous shutdowns. The uncertainty is also affecting holiday season retail forecasts, with consumer confidence indices showing early signs of decline.
Source: CNN Business
