US stocks welcome key earnings week! The performance of six major industries serves as a market "touchstone", can it offset the political deadlock haze?

As the risk of a trade war escalated and the US federal government shutdown continued, market sentiment rapidly deteriorated last week, leading to a "Black Friday" for US stocks - the S&P 500 index, the Nasdaq Composite index, and the Russell 2000 index, which focuses on small-cap stocks, all posted their worst single-day performances since April 10, while the Dow Jones Industrial Average posted its worst single-day performance since May. Following the massive sell-off last Friday, US stocks will enter their second full trading week after the US federal government shutdown. In the upcoming week, due to the ongoing political deadlock in Washington, the market will be unable to obtain updates on key economic data, including import prices, retail sales, hourly wages, and initial jobless claims. Considering that the Federal Reserve's Federal Open Market Committee (FOMC) will enter a blackout period ahead of its October policy meeting starting on October 18 (Saturday), if the US Congress fails to reach an agreement on reopening the government by this Friday, the Fed will enter the blackout period without a significant amount of economic data. Furthermore, a heavier weight is placed on the upcoming US earnings season that will kick off this week, with the focus being on the performance of the six major US banks - JPMorgan Chase, Goldman Sachs Group, Morgan Stanley, Bank of America Corp, Citigroup, and Wells Fargo & Company. The market currently expects that the strong rebound in investment banking business, along with the resilience of the US economy keeping borrowers in good standing and supporting the consumer and business lending sectors, will lead to strong third-quarter performances for these banking giants. Additionally, investors will also be watching for the latest earnings reports from companies such as Taiwan Semiconductor Manufacturing Co., Johnson & Johnson, and Domino's Pizza. The ongoing US government shutdown Last Friday's market turmoil showed that Trump's tariff threats still hold influence. Meanwhile, the impact of the US government shutdown on major stock indices seems relatively mild, with Deutsche Bank describing its market impact as "negligible". Major credit rating agencies have previously indicated that a government shutdown like the current one will have a negative impact on the US sovereign debt rating. However, Jeff Buchbinder, Chief Equity Strategist at broker LPL Financial, stated that given the rating agencies have downgraded ratings in the past based on political instability, this outcome can be almost "ruled out". In the negotiations to reopen the government, the healthcare sector could be the biggest winner or loser in this round. The current major disagreement between the two parties in Congress is over the issue of subsidies under the Affordable Care Act (ACA) - These subsidies are set to expire by the end of the year. The Democrats are pushing for over $1 trillion in funding to extend the subsidies, while the Republicans advocate for letting them expire. For large health insurers like UnitedHealth Group and Humana, if the subsidies end, millions of Americans could drop their coverage, and more may choose not to be insured at all, resulting in a gap in the customer base. For companies like Centene that focus on ACA plans, the end of subsidies could potentially have a significant impact on profit margins. The market is particularly sensitive to this issue. Last Tuesday, when Trump tweeted his "optimistic" view on subsidy talks on social media, healthcare stocks overall rose. Another potential impact of the government shutdown is the surge in job applications from the private sector. According to data from Indeed, as of October 9, job applications initiated by federal employees were 157% higher than on January 1 and 132% higher than the same period last year. Office of Management and Budget Director Russ Vought pledged to carry out mass layoffs, rather than the previous arrangement of "back pay after unpaid leave". The layoffs have officially started last Friday evening. However, LPL Financial pointed out in a recent report that due to businesses finding it difficult to access federal loans, private sector employers may also be hesitant to add new hires. "Rare Earth Renaissance" Last week, Chinese announced measures to strengthen export controls on rare earths, causing a sudden surge in the stock prices of rare earth mining companies that had been relatively stable. Last week, the stock price of the US's only large rare earth mining operator, MP Materials, rose by over 9%, while mining company Trilogy Metals surged over 185% due to the Trump administration's announced investment. Other beneficiaries included USA Rare Earth, which saw a weekly increase of over 25%, and international mining giant Freeport-McMoRan, with a 3% weekly increase. Ryan Castilloux, founder and managing director of rare earth research firm Adamas Intelligence, stated at a mineral industry conference: "The West is experiencing a rare earth renaissance."