Nasdaq posts largest daily gain since May, but the U.S. government "reopening" has both pros and cons.

The record-breaking U.S. government shutdown deadlock is expected to end, a prospect that has triggered a broad stock market rebound, with the Nasdaq Composite recording its largest single-day gain since May.

However, while the market is relieved by the easing of the political deadlock, it must also prepare for the upcoming flood of economic data and potential market volatility once the government "reopens."

On Monday, Wall Street stocks surged amid a wave of optimism. The U.S. Senate passed a critical procedural vote Sunday night, clearing the way for measures to end the shutdown, to which the market responded positively. Although the agreement has not yet been finalized, this measure is expected to be sent to the Republican-led House of Representatives for further review.

The market’s sense of relief is evident, especially in the tech sector, which suffered sell-offs last week. On Monday, the Nasdaq Composite rose 2.3%, marking the largest single-day percentage gain since May 27. The S&P 500 climbed 1.54%, and the Dow Jones Industrial Average rose 0.81%.

This surge reverses the negative effects accumulated during the shutdown. As consequences like missed paychecks for federal employees and flight cancellations began to appear, the emergence of a solution was seen as a major positive by the market. However, analysts warn that the resumption of government operations is not without risk, as a series of delayed economic data releases may trigger new uncertainties.

Tech Stocks Lead Broad Market Rally

Monday's market rebound was led by tech stocks. After suffering the worst weekly performance since April's tariff turmoil last week, the tech sector rebounded strongly. According to FactSet data, the S&P 500’s information technology and communications services sectors posted daily gains of 2.7% and 2.5%, respectively, on Monday.

Specifically, chip stocks including Micron and TSMC, as well as members of the "Magnificent Seven" such as Alphabet, Nvidia, and Tesla, all saw their stock prices increase. The Wall Street Journal reported that other assets also climbed broadly, with gold futures and U.S. Treasury yields rising, and bitcoin’s price boost also lifting crypto-sensitive stocks like Robinhood and Coinbase.

Sameer Samana, global head of equities and real assets at Wells Fargo Investment Institute, said the economic impact of the shutdown “didn’t change the fairly positive backdrop for the market.”

Data Fog Clearing, but Volatility May Follow

The end of the government shutdown means the “fog” over economic data is about to clear, but this could also become a catalyst for market volatility. Investors have gone two consecutive months without the U.S. Bureau of Labor Statistics’ nonfarm payroll report, having had to rely on private data sources. Once the government resumes operations, a large backlog of data—including the September jobs report—may be released all at once.

“You have to be cautious about what you expect,” said Robert Pavlik, senior portfolio manager at Dakota Wealth Management. “What I’m most worried about is, will we see signs that recent corporate layoff announcements are becoming more widespread?”

Although job growth has slowed significantly, and the unemployment rate recently hit 4.3%, its highest level since 2021, investors have been hoping the labor market will remain stable.

Jack McIntyre, fixed income portfolio manager at Brandywine Global, also expressed concern about data quality. He said, “The data will still be messy. I’m not sure when we’ll get it, and I’m not sure how good it will be.” These data will be crucial for the Fed’s December decision on whether to implement a third rate cut this year.

Expensive AI Stocks Face a “Show Me” Moment

Despite Monday’s optimistic market sentiment, concerns over the high valuations of tech stocks—especially those related to artificial intelligence—persist. Scott Welch, CIO of Certuity Wealth Management, pointed out, “The market seems to be finally accepting the fact that big tech companies are remarkable, but they are very, very expensive.”

Welch believes that AI concept stocks are now in a “show me” phase, with the market waiting for them to prove how massive AI spending will be converted into real profits. Robert Pavlik also noted that the recent sell-off in AI-related stocks “released some heat,” giving more investors the chance to enter the market.

However, Welch cautions that since about ten tech stocks account for nearly 40% of the S&P 500’s market value, any one stock faltering due to earnings or other issues could drag down entire portfolios.

Investors Take a Cautiously Optimistic Stance

Looking ahead, analysts hold a cautiously optimistic view of the year-end market. Sameer Samana said that unless a “panic” erupts in the bond market, sending long-term yields surging again, he remains optimistic about stocks at year end. He concluded, “Don’t lose sight, everything is trending upward.”

For investors, this means seizing market opportunities while also preparing for potential volatility. Scott Welch advises clients, “Let’s stay diversified and not try to catch every last penny of profit.”

He believes that as long as portfolios are well-constructed, investors can weather the storm. Analysts also pointed out that the tax cuts and other potential stimulus measures included in the Republican tax and spending bill should become a positive factor for the market at the start of 2026.

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