(MENAFN- Mid-East Info) By: Daniela Hathorn Senior Market Analyst – Capital

For much of its roughly 40-day duration, the U.S. government shutdown felt like background noise compared with earnings and central bank meetings. That changed late last week:

• Confidence cracked: The University of Michigan survey showed U.S. consumer sentiment lurching toward cycle lows, with respondents citing the shutdown as a drag.
• Relief rally: Hopes for a bipartisan deal-and news that a compromise package cleared the Senate and was heading to the House-sparked a risk-on bounce into Monday's Asia/Europe sessions.

The price action suggests investors had underpriced the economic and market impact of prolonged government paralysis. A credible path to reopening reduces a key tail risk and can improve near-term equity tone after last week's slide.

Gold rallies into“good news”

An intriguing twist has emerged, with gold and silver up around 2% and 3%) respectively, even as equities firm. Part of this is likely technical after a multi-week pullback, but there's a macro story too. Gold's medium-term drivers-fiscal largesse, monetary policy, geopolitics, U.S. trade stance, and Fed independence-haven't disappeared; they've merely shifted:

• Less dovish Fed: Markets are trimming the depth/timing of U.S. cuts, which would typically be a headwind for bullion.
• Run-it-hot narrative: Big fiscal plans in the U.S., Europe, and Japan-and proposals like tariff-funded household rebates-keep medium-term inflation risk alive. That supports gold even on“risk-on” days.

Bulls vs. bears: two coherent narratives

You can rationalize both directions right now:

• Bull case: U.S. data has been resilient, earnings broadly solid, and“buy-the-dip” remains the path of least resistance. Pullbacks have been shallow and quickly retraced to new highs.
• Bear case: Valuations are stretched, market breadth is narrow (mega-cap AI leaders doing the heavy lifting), consumer sentiment is soft, and any disappointment from the“Magnificent Seven” could have outsized impact.

Technical backdrop: Weekly RSI readings flashed overbought, and a“shooting-star” style candle preceded last week's sell-off-but Friday's strong rebound preserved the uptrend of higher highs and higher lows across the S&P 500, Dow, and Nasdaq. So far, it still looks like a garden-variety shakeout.

S&P 500 weekly chart: -p decoding="async" class="CToWUd" title="A graph of stock marketAI-generated content may be incorrect." src="#" alt="A graph of stock marketAI-generated content may be incorrect." width="468" data-bit="iit" />

Past performance is not a reliable indicator of future results.

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