As the longest-ever U.S. government shutdown finally drew to a close with Trump’s approval, markets hardly cheered. Thursday’s turn in equity indices suggests investors are not yet convinced that the “all clear” flag has been raised. The S&P 500 slid 1.34%, the Nasdaq 100 dropped 1.64%, and the Dow Jones Industrial Average was down around 1.05% as a rush of macro worries returned to center stage.
Rotation-Watch: Sector ETFs Tell The Tale
With broad indices in the red, the real story is in which sector‐specific ETF buckets are holding up—and which are getting abandoned.
Tech and growth names are the weakest links. The Invesco QQQ Trust (NASDAQ:QQQ), tracking the tech-heavy Nasdaq-100, underperformed its peers with a 2.2% decline on Thursday, highlighting how quickly investors are pulling back from growth names. Semiconductor and AI stocks like Nvidia Corp (NASDAQ:NVDA) and Advanced Micro Devices Inc (NASDAQ:AMD), are facing fresh pressure as traders reassess lofty valuations and rate-cut expectations.
By contrast, the SPDR Dow Jones Industrial Average ETF (NYSE:DIA) and the SPDR S&P 500 ETF Trust (NYSE:SPY) had smaller declines, of 1.3% and 1.6%, respectively, reflecting a partial rotation toward value and dividend-paying names.
Defensive plays started to pop into favor: the Health Care Select Sector SPDR Fund (NYSE:XLV) was showing relative strength (up 0.6%) along with the Utilities Select Sector SPDR Fund (NYSE:XLU), which was down just 0.7%. Tech ETFs such as the Technology Select Sector SPDR Fund (NYSE:XLK) led the sectoral losers, with almost 3% decline.
Also Read: Fed ‘Flying Blind’ As Shutdown Erases October Jobs, Inflation Reports
Flows And Fears
ETF flow data compiled by VettaFi show money is gradually moving into defensive sector ETFs. XLV has garnered around $95 million over the past five days as end-of-shutdown talks began. Meanwhile, SPY saw outflows of $244 million during the same time. QQQ saw larger outflows, losing around $2.6 billion in just 5 days.
According to Reuters, analysts believe that the brief shutdown disrupted federal data releases and added uncertainty around fiscal spending, forcing investors to price in renewed volatility.
Mark Zandi of Moody’s Analytics recently talked to Business insider, warning that even brief shutdowns can chip away at confidence and complicate Federal Reserve decision-making if data gaps persist.
Investor Takeaway
The end of the shutdown removed one headline risk-but not the anxiety underneath. With the QQQ lagging and defensive ETFs like XLV and XLU gaining fresh interest, the message is clear: investors are still playing defense. Until inflation, rate, and spending concerns stabilize, growth-heavy tech funds remain the volatility barometer for risk appetite.
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