What is included in the shutdown agreement to reopen government offices?
Congress passed a funding deal to end the shutdown, including backpaying workers and reopening government agencies.
- The spark was AI cloud infrastructure company CoreWeave, which reported weaker-than-expected third-quarter results.
- The reopening of government offices also left investors wondering about economic indicators.
As the U.S. government reopens after the longest government shutdown in history, federal agencies are rushing to release backlogs of economic data.
But the administration warned that key indicators, particularly payrolls and inflation in October, could be permanently damaged due to lack of data collection during the shutdown.
That leaves the Fed in a cautious position heading into its December policy meeting, with several Fed members insisting that the fight against inflation is far from over.
The probability of a rate cut is fluctuating rapidly, with the market currently seeing a 50-50 chance of a 25 basis point (bp) rate cut or a 25 basis point (bp) rate cut or a unchanged rate.
On Wall Street, after the Dow Jones Industrial Average hit a record high on Wednesday, Nov. 12, AI stocks led the tech sell-off as investors grew worried about supply-side constraints, and momentum reversed sharply on Thursday.
The spark was AI cloud infrastructure company CoreWeave, which reported weaker-than-expected third-quarter results. Management noted that demand for the platform far exceeds the ability to build and deploy new capacity and warned of delays in infrastructure delivery.
“No company has the ability to deliver infrastructure around the world to meet the demands being driven by the world’s largest technology companies, the world’s largest AI labs, governments and corporations. All of this is becoming a reality,” CoreWeave CEO Mike Intrater warned.
Investors interpreted this update as a structural problem in the AI sector, what some analysts are now calling the “backlog paradox”: unprecedented demand without a clear timeline for realization. Coreweave’s stock price, which was up 240% before the earnings release, fell 25% this week.
On the other hand, sectors related to domestic demand and real economic activity, such as healthcare and automobiles, are performing relatively well, as optimism about consumer spending has returned as government offices reopen.
Eli Lilly and General Motors were the biggest winners. GM stock rose slightly to a record high near $73 on Thursday, ending a seven-day streak of daily gains, before falling slightly on Friday. The Detroit automaker continues to gain momentum after a better-than-expected quarterly report released in October and a positive outlook for the rest of the year.
Year-to-date, GM is now up 33%, far outpacing the S&P 500’s 14% rise and the Nasdaq 100’s 18% rise.
Benzinga is a financial news and data company headquartered in Detroit.
