US Stock Futures Fall After House Snubs Trump-backed Republican Plan To Avert Government Shutdown

The S&P 500 is poised to close lower for a second straight week, with the rest of the major averages also staring at weekly losses. Signs are not promising for the market as futures were down very early Friday after the House rejected a Republican plan to avert a government shutdown. 

The Republican-controlled House late Thursday voted 235 to 174 to  reject Bill Number H.R. 10515, the American Relief Act, 2025. The bill sought to endorse a three-month federal funding plan that will run through March 14, 2025, allowing GOP members to engage with the incoming administration under President-elect Donald Trump.

The bill also sought to extend the debt limit for two more years, to Jan. 20, 2027, and provide a $110 billion extension of disaster and farm aid. The debt ceiling is the maximum amount the federal government can borrow to meet its spending requirements. 

The proposals were backed by Trump.

The voting pattern showed that 38 Republicans joined their Democratic colleagues (197 members) in shooting down the bill. Among Democrats, only 2 backed the bill, one voted as present and 11 abstained. 

Trump and Department of Government Efficiency Co-Chair Elon Musk rejected a previous bipartisan plan on Wednesday, forcing the Republicans to rehash the plan. 

The government will shut down partially from midnight Friday without a deal in place.

CNN reported that the White House Office of Management and Budget has been sending additional guidance to federal agencies on shutdown preparations.

The report said about 875,000 federal employees will be furloughed, leaving the 1.4 million, considered essential, to continue working. Most of them may have to work without pay, although they will likely receive their paychecks after the impasse ends. 

The longest government shutdown occurred during Trump’s first term when a partial shutdown was in effect for 35 days from just before Christmas in 2018. The impasse ended after Trump agreed to scrap the provision for a border wall.

Most Asian markets were in the red on Friday, as stocks in the region weighed in on the negative close by Wall Street stocks overnight and the looming U.S. government shutdown. 

As of 1:45 a.m. ET on Friday, the S&P 500 futures slipped 0.21%, while the Nasdaq 100 and Dow futures were down 0.45% and 0.14%, respectively.

Any positive development the government shutdown could bring buyers back to the market, especially as they seek bargains following the recent steep losses and position themselves for the typical Santa Claus rally.

The market may also closely watch comments from San Francisco Fed President Mary Daly and New York Fed President John Williams as they are due to make TV appearances ahead of the market open.

The most important catalyst, however, would be the personal income and spending report for November, which comprises the personal consumption expenditure reading - considered the Fed’s favorite inflation gauge. 

On Stocktwits, sentiment toward the SPDR S&P 500 ETF Trust ($SPY), an exchange-traded fund that tracks the S&P 500 Index, turned bearish (37/100) from ‘neutral’ a day ago. Trader chatter was brisk, with ‘high’ message volume, as they debated the implications of a potential partial government shutdown and the market trajectory going into the year-end and for the next. 

A retail watcher predicted a “rough” Friday as they raised the possibility of investors locking gains before January.

Another retailer predicted a rough year, although not as worse as 2022.

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