The Dow Jones Industrial Average (DJIA) came under renewed pressure on Friday, briefly dipping below 46,800 for the first time in nearly three weeks before clawing back to flat by the close.
A broad pullback in AI stocks and bleak consumer sentiment data weighed on market confidence, further underscoring the fragile balance between investment appetite and consumer resilience. The highly anticipated US Nonfarm Payrolls (NFP) report was notably absent due to the ongoing government shutdown the longest in US history leaving investors to rely on volatile private-sector data amid a vacuum of official labor and inflation figures.
Senate Democrats introduced a temporary “minibus” funding plan to restart government operations, only for House Republicans to reject it almost immediately. In an effort to break the deadlock, Democrats even offered to suspend key Affordable Care Act (ACA) provisions for a year, but Republican hardliners, backed by former President Donald Trump, continue to block reopening efforts unless Democrats agree to deep healthcare cuts that could strip coverage from millions of Americans.
The shutdown has also halted Supplemental Nutrition Assistance Program (SNAP) benefits the first time in history the food-aid program has been paused leaving over 9% of US households, most with children, without critical support. Trump’s administration has sent mixed messages about SNAP funding, shifting daily between promises of full, partial, or zero support.
Consumer sentiment takes a hit
The latest University of Michigan (UoM) Consumer Sentiment survey revealed that Americans are growing sharply more pessimistic about economic conditions. The Consumer Sentiment Index fell to 50.3 from 53.6, while the Consumer Expectations Index dropped to 49 from 50.3 both among their lowest readings in recent years.
The data highlights growing anxiety among households facing declining job prospects, slower income growth, and reduced hiring activity through the second half of the year. Markets, meanwhile, are struggling to reconcile this deterioration with the spending resilience of higher-income consumers who continue to mask economic weakness through stronger post-pandemic purchasing power.
The UoM’s inflation expectations also painted a troubling picture. One-year inflation expectations rose to 4.7% from 4.6%, while the five-year outlook slipped to 3.6% from 3.9%. This flattening of the expectations curve suggests consumers are increasingly focused on near-term price pressures and less confident in long-term stability.
Fed data shows a milder tone, but concerns persist
The New York Federal Reserve’s October consumer survey offered slightly more stable readings, showing one-year inflation expectations easing to 3.2% from 3.4% and the five-year outlook steady at 3.0%. However, the Fed’s accompanying commentary confirmed a “mostly negative” labor market outlook, with households reporting worsening perceptions of both current and future financial conditions.
The divergence between the UoM and Fed data underscores growing uncertainty over whether inflationary pressures are cooling or merely shifting across income segments a hallmark of what economists call a “K-shaped” recovery, where high earners thrive while lower-income households fall behind.
Political blame and economic fallout
The government shutdown has now entered record-breaking territory, with Donald Trump presiding over the two longest closures in US history. With official datasets frozen, investors have turned to alternative private data sources to gauge inflation and labor trends and the results are concerning.
According to DataWeave, major retailers such as Target (TGT) and Walmart (WMT) have raised average prices by 5.5% and 5.3%, respectively. These figures highlight the uneven nature of inflation, which often hits lower-income consumers hardest while broader averages obscure the true cost burden.
In response to mounting criticism, Trump took to social media, claiming his administration had “whipped inflation” and telling critics to “STOP LYIN.”
The statement stood in stark contrast to his 2013 remarks, when he labeled any government shutdown a sign of “weak leadership.” A decade later, Trump now finds himself at the helm of the most prolonged shutdowns in US history—leaving markets, consumers, and policymakers alike grappling with the fallout of political gridlock and eroding economic confidence.
