Despite a government shutdown, investors pushed three major indexes higher on Wednesday. The large-cap S&P 500 index rose 0.3%, the technology-focused Nasdaq Composite rose 0.4% and the Dow Jones Industrial Average, the blue-chip index, rose 0.1%. The S&P 500 closed at a record high.
Investors seem unconcerned with a government shutdown that could invite U.S. President Donald Trump to expand his powers. Earlier in the week, Trump referenced getting rid of things—“Democrat things”—that aren’t aligned with his agenda.
A short government shutdown can be absorbed without much upset. A longer closure becomes more problematic, particularly if it’s coupled with mass firings of federal workers as Trump has threatened. Federal workers and their households are directly at risk for unpaid furloughs or unexpected unemployment.
More broadly, an already soft labor market could worsen, and companies that rely on government funding could face cash flow shortfalls. The consequences could spread wider if the shutdown requires the Fed to make an interest-rate decision this month without economic data from the Bureau of Labor Statistics and other agencies.
Even so, the shutdown and its potential consequences were overshadowed Wednesday morning by news of OpenAI’s $500 billion valuation. The ChatGPT provider is now world’s largest startup.
Stock futures for the S&P 500, Nasdaq 100 and Dow Jones are mixed ahead of the market open on Thursday. Contracts tied to the S&P 500 and the Nasdaq 100 are up 0.2% and 0.5%, respectively. Dow Jones futures are flat.
Investing & Economic News To Watch
The government shutdown will delay employment reports that were scheduled to be released Thursday and Friday, including the initial jobless claims report for the week of September 27 and the U.S. employment report for September.
Payroll provider ADP did release its employment report Wednesday, which showed a loss of 32,000 private jobs in September. In the prior month, the economy added 54,000 private jobs.
Today’s Trading Lesson
What is the difference between growth stocks and value stocks? Growth stocks demonstrate characteristics associated with higher-than-average gain potential. Value stocks are priced below their intrinsic value—essentially what they’re worth—which positions them to outpace peers when the market corrects the under-pricing over time.
Understanding the distinction between growth and value stocks supports better trading and allocation decisions. Depending on your investing style and personality, you may want to focus on growth or value. Or, you may prefer to diversify into both to tailor the risk level of your stock portfolio.
Growth Stocks
Growth stocks have higher gain potential than value stocks, along with more volatility. They are also more expensive, in terms of price-to-earnings and price-to-sales. Typically, growth companies target huge addressable markets with a unique or innovative product that can be adopted quickly.
Growth stocks usually demonstrate fast-rising revenue, EPS and cash flow. They may also have high margins, supported by a differentiated product that provides pricing power. Growth companies also have strong outlooks and high expectations from analysts.
Value Stocks
Value stocks don’t have the gain potential of growth stocks, but they are less volatile and more resilient. They tend to have enduring competitive advantages that provide business visibility, such as a globally recognized brand, unmatched scale or high switching costs.
Value stocks often demonstrate predictable, slow-growing revenue, EPS and cash flow. They often pay dividends and participate in share repurchases. Typically, value stocks have lower price-to-earnings ratios compared to peers. Relative to growth stocks, they can be boring but more reliable.