Happy Tuesday! There is no end in sight for the U.S. government shutdown. Congress is still gridlocked over budget disputes, and the Senate again failed to pass a funding bill. Hundreds of thousands of federal workers remain furloughed or unpaid. Plus, key data releases, including the September jobs report and CPI numbers, have been delayed. This leaves the Fed with less visibility as it heads into its October meeting.
Broadly speaking, most shutdowns are short and leave little lasting damage on the market. Even the effects of the 35-day 2018‑2019 shutdown were short-lived. Invesco data shows that the S&P 500 Index generated positive returns during 12 of the previous 21 shutdowns.
And if you look only at the stock market, you would probably think Washington's drama is only a nagging background noise. The S&P 500, Dow, and Nasdaq all closed last week higher, ignoring policy paralysis as just another headline.
The three leading indices saw a positive weekly finish last Friday. The broad-market S&P 500 rose around 1.1% for the week, along with the Dow, while the tech-heavy Nasdaq gained 1.3%. The small-cap Russell jumped nearly 2%, showing investor confidence in the broader market. On Monday, the S&P 500 rose 0.4%, setting another record. The Dow Jones Industrial Average edged down 0.1%, while the Nasdaq Composite gained 0.7%.
But as an asset class, gold is the real winner this year, with a nearly 50% growth year-to-date.
The Deep Dive
This week, we are tracking three key stories from the quarter that just wrapped up:
- This September Defies History
- Top 3 Stocks of Q3
- Top 3 Sectors of Q3
Let's take a closer look…
1. 2nd Best September Performance in 27 Years
September is usually not a great month for Wall Street. This year, though, the market ignored its bad reputation. The three major U.S. indexes posted solid monthly gains. The S&P 500 rose 3.5%, the Nasdaq Composite jumped 5.6%, and the Dow Jones Industrial Average added 1.9%, marking the best September for the S&P and Nasdaq since 2010.
Investors were cheered by the Fed's decision earlier this month to cut its policy rate by 25 basis points, taking it to a range of 4%-4.25%, and markets are already pricing in two more potential cuts before year-end.
Meanwhile, the AI frenzy continued to drive megacap tech stocks higher, and a new wave of AI-focused companies is catching investors' attention. As Adam Turnquist, chief technical strategist at LPL Financial, put it:
In the last week of September, $26 billion flowed into global equities, with nearly $9 billion going into tech alone. AI, rate-cut optimism, and corporate earnings have kept the market narrative bullish.
Looking ahead, we have entered what has historically been the best quarter of the year for the S&P 500. History shows that the next three months could provide another strong run, though, as always, the market never stops surprising. Since 1950, this quarter has returned positive gains 80% of the time, with an average increase of 4.2%
2. Top 3 S&P 500 Stocks of Last Quarter
The S&P 500 delivered a 7.8% return in Q3, fueled by strong corporate earnings, resilient consumer demand, and the Fed's dovish signals. Despite tariffs and global uncertainty, a few names stood out, delivering eye-popping returns
1. Western Digital (Up 104% in Q3)
Remember, we talked about the in our last edition? Well, they are as hot as it can be. Western Digital is a leading provider of hard drives and SSDs for data centers, riding the wave of soaring demand for data storage. Alongside Seagate, the two control roughly 80% of the market, giving them a near-duopoly
Western Digital delivered a 47% return in September alone, and is up 191% year-to-date. As AI workloads grow, the need for reliable storage isn't slowing down anytime soon.
2. AppLovin (Up 98% in Q3)
AppLovin has become a powerhouse in the mobile app ecosystem, helping developers market, monetize, and analyze their apps. Its AI-driven advertising engine helps find the right customers, and the results are stunning. In Q2, revenue jumped 77% to $1.26 billion, while net income soared 164% to $820 million
The stock is up 111% YTD and just received a price target upgrade from BofA to $860. AppLovin is a textbook example of AI supercharging growth in an already booming market.
3. Warner Bros. Discovery (Up 75% in Q3)
Warner Bros. Discovery's rally has been fueled by corporate restructuring and takeover rumors. The company split its movie/streaming operations from TV, streamlining operations and setting the stage for potential divestments or acquisitions.
Even though nothing has materialized yet, the speculation drove shares higher. WBD is up 80% YTD, proving that sometimes rumors alone can be market catalysts.
3. Top 3 Sectors of the Last Quarter
Once again, tech led the charge. Communication Services topped the leaderboard with a 12.75% gain, closely followed by Information Technology at 12.4%. The sector's strength was driven by AI optimism, megacap tech rallies, and renewed investor enthusiasm for growth themes
Consumer Cyclicals also posted solid gains, up 8.9%, shrugging off tariffs and showing that Americans aren't holding back on discretionary spending. Consumer Defensives, however, fell by 2.7%, showing that in a bullish quarter, safety-first sectors don't always keep up when growth and tech are taking markets to new highs.
Before we sign-off
Markets move not just on data, but on how investors interpret them. In each of the stories we cover, it all comes down to market expectations and sentiment. When sentiment runs ahead of fundamentals, what follows is volatility.
At AlphaPro, we track the voice behind the numbers and tone of earnings calls, policy speeches, and analyst commentary. Our Earnings Sentiment Score helps you cut through the noise and see how executives and policymakers are shaping narratives in real time.
Same time next week? See you then.
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