The US stock market welcomes a crucial earnings report week! Six major industries' performance serves as the market's "touchstone," can it hedge against the shadow of political deadlock?

According to Zhitong Finance APP, affected by the escalating risks of the trade war and the ongoing federal government shutdown, market sentiment has rapidly deteriorated, leading to a "Black Friday" for U.S. stocks last week — the S&P 500 index, Nasdaq Composite index, and the Russell 2000 index, which focuses on small-cap stocks, all recorded their worst single-day performance since April 10, while the Dow Jones Industrial Average marked its worst single-day performance since May.

After experiencing a massive sell-off last Friday, U.S. stocks will enter the second full trading week following the federal government shutdown. In the upcoming week, due to the ongoing political deadlock in Washington, the market will not receive updates on several key economic data, including import prices, retail sales, hourly wages, and initial jobless claims. Given that the Federal Open Market Committee (FOMC) will enter its quiet period before the October policy meeting starting on October 18 (Saturday), if the U.S. Congress does not reach an agreement to restart the government before this Friday, the Federal Reserve will enter its quiet period without a wealth of economic data.

More importantly, a new earnings season for U.S. stocks will kick off this week, with the six major U.S. banks — JP Morgan (JPM.US), Goldman Sachs (GS.US), Morgan Stanley (MS.US), Bank of America (BAC.US), Citigroup (C.US), and Wells Fargo (WFC.US) — taking the lead. The market currently expects that, thanks to a strong recovery in investment banking and the resilience of the U.S. economy keeping borrowers in good shape and supporting the consumer and commercial loan sectors, the third-quarter performance of these six major banks will be strong. Additionally, investors will also pay attention to the latest earnings reports from companies such as Taiwan Semiconductor Manufacturing Company (TSM.US), Johnson & Johnson (JNJ.US), and Domino's Pizza (DPZ.US).

U.S. Government Continues to Shutdown

The market crash last Friday indicates that Trump's tariff threats remain influential. Meanwhile, the impact of the government shutdown on major stock indices seems relatively mild, with Deutsche Bank describing its market impact as "insignificant."

Major credit rating agencies have previously pointed out that a government shutdown like the current one would negatively affect the U.S. debt rating. However, Jeff Buchbinder, chief equity strategist at brokerage LPL Financial, stated that given that rating agencies have downgraded ratings based on political instability in recent years, this outcome is essentially "ruled out."

In the negotiations to restart the government, the healthcare sector may become the area with the most winners or losers. The main disagreement between the two parties in Congress currently revolves around the subsidies for the Affordable Care Act (ACA) — which are set to expire at the end of the year. Democrats want to allocate over $1 trillion to extend the subsidies, while Republicans advocate for their expiration.

For large healthcare providers like UnitedHealth (UNH.US) and Humana (HUM.US), if the subsidies end, millions of Americans may drop their insurance, and more may become completely uninsured, leading to a gap in their customer base. For companies like Centene (CNC.US), which focus on ACA plans, the termination of subsidies could mean a significant hit to profit margins The market is particularly sensitive to this. Last Tuesday, when Trump expressed an "optimistic attitude" towards subsidy negotiations on social media, healthcare stocks rose overall.

Another potential impact of the government shutdown is a surge in job applications from the private sector. According to Indeed, as of October 9, job applications initiated by federal employees were 157% higher than the level on January 1 and 132% higher than the same period last year. Russ Vought, director of the White House Office of Management and Budget, promised that there would be large-scale layoffs rather than the previous arrangement of "back pay after unpaid leave." Layoff actions officially began last Friday evening.

However, LPL Financial pointed out in a recent report that due to difficulties in obtaining federal loans, private sector employers may also be reluctant to add new hires.

"Rare Earth Renaissance"

Later last week, after China announced measures to strengthen export controls on rare earths, the stock prices of rare earth mining companies, which had been relatively stable, suddenly soared. Last week, MP Materials (MP.US), the only large rare earth mining operator in the U.S., saw its stock price rise by more than 9%, while Trilogy Metals (TMQ.US) surged over 185% due to the Trump administration's announcement of investments. Other beneficiaries included USA Rare Earth (USAR.US) — with a weekly increase of over 25% — and international mining giant Freeport-McMoRan (FCX.US) — with a weekly increase of 3%.

Ryan Castilloux, founder and managing director of rare earth research firm Adamas Intelligence, stated at a minerals industry conference, "The West is experiencing a Rare Earth Renaissance."