The Economic & Political Picture

The U.S. government shutdown continued through the week, freezing the release of several key economic reports. This data vacuum has made it difficult to get a clear, official read on the health of the economy, forcing analysts to rely on private-sector indicators and speculation.1 The shutdown has resulted in a delay of crucial data from agencies like the Bureau of Labor Statistics (BLS) and the Census Bureau.

Important Data Not Released Due to Shutdown:

The following are some of the key reports that have been postponed:

• September Employment Situation (Nonfarm Payrolls)
• September Producer Price Index (PPI)
• September Retail Sales
• September Housing Starts
• September Industrial Production and Capacity Utilization

The September Consumer Price Index (CPI) report is an exception. While most BLS data is on hold, the agency has indicated that the September CPI data will be released on October 24. However, the release is solely for the purpose of calculating the 2026 Social Security cost-of-living adjustment (COLA), and no other data reports will be published by the BLS in the interim. This partial release underscores the critical need for this specific data point for government functions, but it does little to alleviate the broader information gap for investors and policymakers.^2,3

Big Bank Earnings Provide Resilience

Despite the macroeconomic headwinds, major U.S. banks kicked off earnings season with strong third-quarter results that largely exceeded analyst expectations. Wells Fargo, Citigroup, and Goldman Sachs all reported positive earnings on Tuesday, October 14, highlighting the sector's resilience. Wells Fargo's adjusted earnings per share (EPS) of $1.73 surpassed the consensus estimate of $1.55, driven by strong fee income and higher loan balances¹¹. Citigroup reported its best third-quarter performance in a decade, with revenue surging 9% to $22.1 billion, as every core business hit record highs¹². Goldman Sachs delivered robust results, with a diluted EPS of $12.25, exceeding analysts' forecasts of $11.02, fueled by strong performance in investment banking and wealth management¹³. While some of these stocks experienced pre-market declines due to higher-than-expected expenses, the overall trend of strong revenue and earnings growth across the board provides a positive signal for the financial sector and the broader market.

Cracks in the Credit Market

This week, two high-profile debt defaults in the automotive sector served as a stark reminder of the underlying stress in riskier credit segments.

• Tricolor's Bankruptcy: Subprime auto lender Tricolor Holdings filed for Chapter 7 bankruptcy, following allegations of fraudulent activity, including the double-pledging of collateral on its auto loans⁴. The collapse has led to a downgrade of several of its securitized auto loans by a rating agency and raised concerns about underwriting standards in the subprime auto lending industry.⁴
• First Brands' Financial Scandal: Auto parts supplier First Brands Group filed for Chapter 11 bankruptcy amid an accounting scandal and accusations that over $2 billion in funds had "simply vanished"⁵. The company, which had a significant amount of off-balance-sheet liabilities and factoring arrangements, has sown distrust among lenders and prompted a sell-off in the shares of some financial firms with exposure to the company's debt.

These events highlight the fragility of highly leveraged companies and the potential for a ripple effect in a tightening credit environment.

Market Performance & Worsening Consumer Mood

The overall mood among consumers remained weak, a trend that was reinforced by the latest sentiment data.

• Consumer Sentiment: The preliminary University of Michigan Consumer Sentiment Index for October was released on October 10 and came in at 55.0⁶. This reading, which was slightly lower than September's final number, marks the index's lowest point since May. The decline was driven by persistent consumer concerns about high prices and future job prospects.
• Stocks: Following a strong start to the month, the U.S. stock market reversed course this week. The S&P 500 dropped about 1%, and the and the tech-heavy Nasdaq Composite declined by about 1.2% since our last update.^7,8,9
• Bonds: Treasury yields continued their recent volatility. The yield on the 10-year Treasury note stood at 4.05% on October 10, a decline from the 4.14% at the beginning of the week.¹⁰ This move indicates that investors sought the relative safety of government bonds amid the market turbulence and economic uncertainty.

Our Perspective:

The confluence of a political standoff, mounting credit market stress, and persistent economic uncertainty created a challenging environment for investors this week. While the government shutdown is a temporary issue, the lack of official economic data creates a significant headwind for decision-making. The political stalemate over government funding shows no signs of resolution, and both sides seem to be digging in.  The defaults in the subprime auto and auto parts sectors serve as a warning about potential vulnerabilities in highly leveraged parts of the economy, but problems are not widespread. We are likely to see continued volatility as the market grapples with these risks and the absence of clear economic signals.

Footnotes

¹ U.S. Bureau of Labor Statistics. "Government shutdown and data releases." October 2025.

² RBC Capital Markets. "US Week Ahead: Shutdown will ripple data for the remainder of 2025." October 10, 2025.

³ U.S. Government Accountability Office. "Lapse in Appropriations." October 2025.

⁴ JD Supra. "Seeing Red Flags in Tricolor: A Colorful Lesson on Collateral Interests." September 24, 2025.

⁵ Associated Press. "First Brands founder resigns amid accounting scandal and billions in missing funds." October 13, 2025.

⁶ University of Michigan. "Preliminary Consumer Sentiment Report." October 10, 2025.

⁷ S&P Global. "S&P 500 Daily Price Performance." October 8-14, 2025.

⁸ Dow Jones & Company. "Dow Jones Industrial Average (DJIA) Historical Data." October 8-14, 2025.

⁹ Nasdaq, Inc. "NASDAQ Composite Index (COMP) Historical Data." October 8-14, 2025.

¹⁰ U.S. Department of the Treasury. "Daily Treasury Yield Curve Rates." October 8-10, 2025.

¹¹ Wells Fargo & Co. "Wells Fargo Reports Third Quarter 2025 Net Income of $5.6 billion, or $1.66 per Diluted Share." October 14, 2025.

¹² Citigroup Inc. "Citi Reports Third Quarter 2025 Earnings." October 14, 2025.

¹³ Goldman Sachs Group Inc. "Goldman Sachs Reports 2025 Third Quarter Earnings Per Common Share of $12.25." October 14, 2025.