In a show of strength, both the S&P 500 ETF (SPY) and the Nasdaq 100 ETF (QQQ) closed higher on Monday, shrugging off rising odds of a government shutdown and President Trump’s potential tariffs on Canada.
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Senate Democrats have vowed to vote against a government funding bill that includes appropriations for the Department of Homeland Security (DHS) after 37-year-old Alex Pretti was fatally shot by a federal agent in Minneapolis. A total of 12 bills are needed to fully fund the government, with six already approved. The remaining six have been grouped into one package, with Democrats proposing that funding for DHS be voted on separately in order to avoid a shutdown.
“Take up DHS by itself, let’s have an honest negotiation, put some guardrails on what’s going on, some accountability, and that would solve this problem,” said Senator Angus King of Maine. The odds of a government shutdown have ripped higher to 81% from 10% on Friday on prediction platform Polymarket.
Minnesota Governor Tim Walz noted that Trump is considering reducing the number of federal agents in the state after the pair spoke over the phone on Monday morning. That comes after Trump announced he would send “Border Czar” and Immigration and Customs Enforcement (ICE) veteran Tom Homan to assist with the crackdown in Minnesota.
On the tariff front, Trump threatened a 100% tariff on Canadian imports if the country signs a trade deal with China that involves lowering duties on the first 49,000 Chinese electric vehicle imports to 6.1% from 100%. He warned in a Truth Social post that China would “eat Canada alive, completely devour it.”
It wasn’t all bad news, as U.S. durable goods orders, which track demand for goods designed to last at least three years, signaled that companies may be looking past tariffs. New orders for November jumped 5.3% month-over-month, above the consensus estimate of 3.8%. The growth was driven by a strong showing in non-defense aircraft, with orders jumping by 97.6%. During the month, Boeing (BA) reported 164 orders, up from 15 in October. In addition, core durable goods orders, which exclude transportation, ticked higher by 0.5% and surpassed the estimate of 0.3%.
Looking ahead, the Fed will hold its first Federal Open Market Committee (FOMC) meeting of the year on January 28, where it is widely expected to hold rates steady amid signs of stabilization within the labor market.
The S&P 500 (SPX) closed with a 0.50% gain, while the Nasdaq 100 (NDX) returned 0.42%.