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S&P 500 Index to reach record highs as rate-cut betting offsets shutdown concerns

On Thursday, the benchmark S&P 500 is expected to open at an all-time high, thanks to renewed expectations of interest rate reductions. Traders are bracing for a session that will be data light and with few new catalysts.

Investors have been able to ignore the uncertainty of the U.S. Government Shutdown because they are anchored to a Federal Reserve that is dovish.

The labor market is at the core of the Fed’s policy outlook, and it's a crucial part of its dual mandate. Investors are increasingly relying on alternative data sources as the government shutdown has created a data vacuum.

Art Hogan is the chief market strategist for B. Riley Wealth. He said, "I believe they will consider the fact that there's a weak trend in the job market, which they are trying to defend at this time."

According to a Challenger, Gray & Christmas report, U.S. employers have announced fewer layoffs since September, but their hiring plans for this year are the lowest they've been since 2009.

The report was released a day following a Wednesday ADP National Employment Report that showed a lower than expected level of employment.

These reports are not as important as those from the Labor Department. They fill the gap left Thursday by the weekly unemployment claims report. This is a key indicator of labor market strength and was the first data to be affected by the shutdown.

The recent data has been interpreted by traders as being enough to force the Federal Reserve towards a rate cut of 25 basis points at its next policy meeting.

At 8:23 a.m. At 8:23 a.m. ET, Dow E Minis were down by 7 points or 0.01%. S&P 500 E Minis were up by 19 points or 0.28%. Nasdaq E minis were up by 144.25 or 0.58%.

On Wednesday, the S&P 500 index and blue-chip Dow closed at record highs.

In the past, shutdowns of government agencies have not had a significant impact on equity market. Investors are looking for signs of monetary ease, and the data vacuum is a risk.

Hogan stated that the Fed would be more inclined to reduce rates the longer the shutdown continues.

Investors will also be analyzing the comments of Dallas Fed President Lorie Lo Logan on Thursday.

Tesla's stock rose 1.9% ahead of the release of its quarterly delivery report. Shares of Lithium Americas, listed on NYSE, fell 4.7% following a downgrade by Canaccord Genuity.

Equifax and TransUnion credit bureaus fell by 10.2% and 10%, respectively, following the launch of a FICO program which could give mortgage lenders access to scores without having to rely on bureaus. FICO was up by 20.3%.

Advanced Micro Devices rose 3.3% following a report that Intel had begun early discussions to add Advanced Micro Devices as a customer. (Reporting and editing by Niket Nishant and Sukriti gupta, both in Bengaluru)

(source: Reuters)