Stocks rise after Senate moves to end government shutdown
Traders work on the floor of the New York Stock Exchange (NYSE) on Nov. 7, 2025 in New York City. (Spencer Platt/Getty Images)
(NEW YORK) — Stocks rose in early trading on Monday after the Senate voted hours earlier to advance a potential deal on the government shutdown, which has weighed on economic output and cast uncertainty over markets for well over a month.
The Dow Jones Industrial Average jumped 240 points, or 0.5%, while the S&P 500 climbed 1%. The tech-heavy Nasdaq increased 1.6%.
Lawmakers in a rare Sunday session cleared a key hurdle toward potentially reopening the government by advancing a short-term funding bill by a razor-thin vote of 60-40, just meeting the threshold for it to pass.
Stocks rebounded on Monday after major indices registered a loss over the previous week, a rare blemish that hadn’t happened in four weeks prior.
The economy has shown some signs of strain during the shutdown.
The Senate is scheduled on Monday to reconvene at 11 a.m. ET to continue working toward ending the federal government shutdown, which is now in its 41st day.
There are still some procedural measures necessary for the Senate to pass a deal on the government shutdown and send it for potential approval in the Republican-controlled House.
A potential resolution of the government shutdown would restore jobs and backpay for thousands of federal employees, which is expected to provide a jolt for the U.S. economy.
The federal government would also resume the collection and release of key government day in the event of shutdown deal, allowing investors to observe monthly inflation and hiring reports.
The Federal Reserve is set to issue a decision on the level of interest rates early next month. The central bank has slashed interest rates a quarter of a percentage point at each of its last two meetings.
(WASHINGTON) –The Federal Reserve cut its benchmark interest rate a quarter of a percentage point on Wednesday, opting for its second interest rate cut this year in an effort to jumpstart the flagging labor market.
The widely expected move delivers a lowering of interest rates sought by President Donald Trump, though the size of the cut falls short of the major drawdown called for repeatedly by the president.
The policy marks the first interest rate adjustment since the outset of a weekslong government shutdown that threatens to cool economic activity, all the while sharply restricting the release of gold-standard federal data prized by Fed policymakers.
In a rare exception, the U.S. government issued an inflation report last week showing a continued acceleration of price increases, which may complicate the Fed’s attempt to revive the labor market.
Inflation has picked up in recent months while hiring has slowed, posing a risk of an economic double-whammy known as “stagflation.”
Those economic conditions have put the Federal Reserve in a bind, since the central bank must balance a dual mandate to keep inflation under control and maximize employment.
“Uncertainty about the economic outlook remains elevated. The Committee is attentive to the risks to both sides of its dual mandate and judges that downside risks to employment rose in recent months,” the Federal Open Market Committee (FOMC), a policymaking body at the Fed, said in a statement on Wednesday.
If the Fed raises interest rates as a means of protecting against tariff-induced inflation, it risks tipping the economy into a downturn. On the other hand, if the Fed lowers rates to stimulate the economy in the face of a hiring slowdown, it threatens to boost spending and worsen inflation.
Last month, the Fed cut its benchmark interest rate a quarter of a percentage point, opting for its first interest rate cut this year. The federal funds rate stands between 3.75% and 4%, preserving much of a sharp increase imposed in response to a pandemic-era bout of inflation.
Last month, the Federal Open Market Committee (FOMC), a policymaking body at the Fed, projected two additional quarter-point rate cuts over the remainder of the year. By contrast, Trump has called for rate cuts totaling as much as 3 percentage points.
Trump has carried out a pressure campaign at the Fed with little precedent.
In recent months, Trump moved to fire one member of the Fed’s board of governors and secure Senate confirmation for another. Both officials were among the 12 policymakers who cast votes on last month’s interest-rate decision, though their status remained uncertain days before the Fed meeting. They both stand poised to cast votes again on Wednesday.
Stephen Miran, a top White House economic advisor who joined the Fed last month, cast the lone vote in favor of a larger half-point rate cut.
Trump attempted to fire board member Lisa Cook, who sued Trump over her attempted ouster, saying the decision violated her legal protections as an employee at the independent federal agency. Trump said he removed Cook over mortgage fraud allegations against her.
Federal law allows the president to remove a member of the Fed board “for cause,” though no president has attempted such a removal in the 112-year history of the central bank.
Last month, a federal judge issued a preliminary injunction requiring the Fed to let Cook continue serving in her role as a governor of the Federal Reserve System as her lawsuit moves through the courts.
(NEW YORK) — Fears of an artificial intelligence bubble have rattled the stock market in recent weeks and set off concern among critics about a wider risk to the U.S. economy.
A surge of AI spending accounted for roughly two-thirds of gross domestic product growth over the first half of 2025, JPMorgan Asset Management found, outpacing the contribution made by hundreds of millions of U.S. consumers. Many of the nation’s largest companies have poured funds into the chips and data centers necessary to operate AI.
A central question looms over the fate of the technology and the trillions of dollars being spent to develop it: Will AI deliver the type of profits that could turn the product into a moneymaker?
Proponents say a lag between the buildout of AI infrastructure and an onrush of gains is to be expected, pointing to a similar lull after the introduction of other watershed technologies, such as the internet. The widespread adoption of products like OpenAI’s ChatGPT has revealed a massive potential customer base, they add, noting AI firms have prioritized product development over profits.
Critics, however, say the considerable costs have put pressure on AI to deliver stratospheric profits, but little evidence suggests businesses or everyday users will get enough value to warrant forking over a mountain of cash. The technology must deliver within years rather than decades, they add, since the current level of spending cannot be sustained.
“It’s not particularly unusual for a market at this early stage to not be making much profit,” Paul Kedrosky, a venture capitalist and research fellow at MIT’s Institute for the Digital Economy, told ABC News. “Of course, the difference is most markets at this stage aren’t also spending a trillion dollars.”
AI boosters and skeptics alike have raised alarm about the economic stakes. “A reversal would risk recession. We can’t afford to go backwards,” David Sacks, a venture capitalist and White House czar for crypto and AI, said in a post on X on Monday.
Gary Marcus, a professor emeritus at New York University and author, who often criticizes hype surrounding AI, said in a Substack post in September: “It’s not going to be pretty when the music stops.”
A “bubble” is a term used to describe a market in which an asset’s price far outpaces its value on the market. Questions centering on the productivity gains and profitability of AI take up the task of assessing the economic value of the new technology.
Chip giant Nvidia has delivered major profits selling the semiconductors behind AI, becoming the most valuable company in the world by market capitalization. Such success indicates appetite for the building blocks of AI rather than its end uses, however.
For now, AI has failed to achieve gains on a scale near its immense costs, some analysts said. A product like AI would typically generate revenue in the form of sales either direct to consumers or to third-party businesses using the technology to enhance their offerings. AI has faced challenges on both fronts, some analysts said.
Roughly 95% of businesses invested in AI have failed to make money off of the technology, an MIT study in July found, estimating the combined amount spent by the firms is around $40 billion.
“Despite high-profile investment, industry-level transformation remains limited,” the study said.
Consumer-driven profits have also proven elusive. OpenAI’s ChatGPT, for example, boasts about 800 million weekly active users, making it one of the fastest-growing apps ever. That user base makes up about a quarter of the 3 billion monthly active users combined on the array of apps offered by Meta, a company that generated more than $50 billion over a recent three-month period. But OpenAI’s sales do not come close.
OpenAI CFO Sarah Prior told CNBC in September the company is on pace to earn about $13 billion in revenue over the course of 2025, which amounts to $3.25 billion per quarter. On the BG² podcast earlier this month, OpenAI CEO Sam Altman said the company is generating “well more revenue than that.”
Revenue is “growing steeply,” Altman added. “We are taking a forward bet that it will continue to grow, and that not only will ChatGPT keep growing, but we will be able to become one of the important AI clouds, that our consumer device business will be a significant and important thing, that AI that can automate science will create huge value.”
Some analysts said the rapid adoption of chatbots underscores the usefulness of the technology, noting that it paves the way for a potentially significant revenue stream if firms were to populate the AI assistants with advertisements or charge for access.
“It’s the fastest adoption of basically any consumer technology that we know about,” Ethan Mollick, a professor of management at the University of Pennsylvania who studies AI, told ABC News. “There is a path to making money.”
Arun Sundararajan, a professor of entrepreneurship at New York University, said a delay in uptake from businesses is to be expected for a potentially paradigm-shifting technology like AI.
“It’s true that we haven’t yet seen evidence of significant productivity gains from AI investments, but I’m not surprised,” Sundararajan said. “At the early stages of the rollout of a technology like this, there’s a lot of experimentation and learning.”
“As businesses start to understand how to fundamentally change the way that they work using this technology, that’s when you start to see the big productivity gains,” Sundararajan added.
Other analysts disagreed about the likelihood of profits, pointing in part to the challenge posed by infrastructure costs associated with AI.
For many digital products such as software or smartphone apps, the profitability owes to the relatively low cost of providing the service on a massive scale, Kedrosky said. For instance, the initial cost burden of developing a website is significant, but once completed, a website can reach millions of users with little extra cost.
For AI, however, the energy and computational costs increase in proportion to a given number of chat prompts or users, meaning the technology lacks such low-cost scalability.
“Every time you prompt an AI model, it eats up costs to maintain and cool servers. Those costs rise with the number of users. That’s a problem,” Kedrosky said.
The scale of investment also places pressure on AI companies to deliver major profits within a limited timeframe, since the current level of financing cannot continue into perpetuity, Andrew Odlyzko, an emeritus University of Minnesota mathematics professor who focuses on financial bubbles, told ABC News.
“The problem is when you talk about investments in data centers in the trillions of dollars and do the basic financial arithmetic of how much revenue you have to bring in to justify that, it gets into figures larger than total revenues of Google,” Odlyzuko said.
To be sure, some analysts said the technology remains in an early stage of its development, making the outcome uncertain.
“We’re in the early innings,” Vasant Dhar, a professor of data science at New York University who believes AI will ultimately deliver significant profit, told ABC News. “It remains to be seen what form it will take.”
(NEW YORK) — Car buyers may face elevated prices and a shortage of some vehicles due to a supply chain snarled by tariffs and challenges accessing crucial materials, some industry experts told ABC News.
A shortage of aluminum halted production at plants operated by Jeep and Ford earlier this month, pausing the output of some Jeep SUVs and Ford trucks, the Wall Street Journal reported. Meanwhile, a trade spat between the U.S. and China has raised questions about the availability of semiconductors, a critical part at the center of a pandemic-era supply shock.
Those disruptions follow far-reaching U.S. tariffs that have hit foreign automakers and added complications for domestic companies long-intertwined with manufacturers in Canada and Mexico.
The headwinds swirling in the auto industry could make it more difficult for consumers to find their desired vehicle at an affordable price, but carmakers may opt to absorb potential added costs and ease pain for buyers, some experts said. For now, they noted, uncertainty about the level of supply disruption leaves the outcome unclear.
“You start to roll all of this together and it does get significant,” Peter Morici, a professor emeritus at the University of Maryland’s School of Business, told ABC News. “My feeling is that there just have been too many disruptions for this not to affect the availability of automobiles if this goes on long enough. This question is whether it will.”
Stellantis, the parent company of Jeep, declined ABC News’ request for comment. Ford did not respond to the request.
Steep tariffs of 25% on vehicles imported into the U.S. went into effect in April, hiking costs for foreign-made cars, SUVs, minivans, cargo vans and light trucks. Within hours of the policy rollout, Ferrari said it would raise prices by as much as 10% for some models to compensate for the tariffs.
Widespread tariff-driven price increases have never materialized, however.
The policy largely exempted vehicles covered by a free trade agreement between the U.S. and Canada known as the United States-Mexico-Canada Agreement. For such cars, the tariffs only apply to the value of their non-U.S. content, a fraction of the overall cost, the White House said.
Some trade agreements with other nations resulted in lower auto tariffs, including deals with top car exporters Japan and the European Union. Last week, Trump extended a rebate for U.S. automakers meant to cushion the blow of tariff-related costs.
Still, top automakers tallied hundreds of millions of dollars in tariff-related expenses. Those costs risk colliding with concerns over the availability of aluminum and semiconductors, some experts said.
“The fact that it’s all coming at them is a challenge for automakers,” Jessica Caldwell, head of insights at Edmunds, told ABC News, noting the companies had yet to pass along the costs to consumers in the form of higher prices.
“We haven’t seen a lot of impact of tariffs; we haven’t seen a lot of impact of the supply chain. That doesn’t mean we won’t eventually,” Caldwell added.
Earlier this month, China significantly tightened its restrictions on rare earth elements, which make up a key input in semiconductors found in an array of products from cars to home appliances.
The move prompted President Donald Trump to threaten 100% tariffs on all China-made goods next month. Beijing has publicly stood firm on the policy, leaving the two sides at an impasse with massive implications for U.S. automakers.
“The semiconductor is worrisome because it’s in so many things in the car. It’s not just in a body panel but it could be in the seats, the entertainment system — anything basically,” Caldwell said.
To be sure, the ultimate consumer impact of supply chain disruption remains uncertain, experts said. Carmakers may continue to absorb tariff-related costs in an effort to maintain price levels and protect their share of the market, they added.
“I see manufacturers absorbing more of the pain in the short term so they don’t lose customers,” Joseph McCabe, president and CEO of advisory firm AutoForecast Solutions, told ABC News.
Even so, the cloudy forecast should nudge some buyers to move forward with a planned purchase instead of holding out for better conditions, Caldwell said.
“It’s probably a good idea to keep your eyes open for deals,” she added. “I wouldn’t hesitate to buy earlier rather than thinking, ‘Maybe in the future it will be a better time to buy.’ I’m not sure it will be.”
Morici, of the University of Maryland, agreed. “If you want to buy a car in the next month, you should do it — if you can get a good deal,” Morici said.
