Wall Street's three major indexes managed to close Tuesday's choppy session higher, marking quarterly and monthly gains, even as investors braced for a U.S. government shutdown, which would delay key economic reports and muddy the Federal Reserve's interest rate policy outlook.

With investors having bet for some time on a spate of further Fed rate cuts, the benchmark S&P 500, the tech-heavy Nasdaq and the Dow all gained for the second quarter in a row. For the S&P 500 and the Dow, it also marked their fifth straight monthly gain while the Nasdaq registered its sixth straight monthly gain.

And with no signs of an end to the standoff in Washington, U.S. President Donald Trump warned congressional Democrats that a federal government shutdown at midnight would allow his administration to take "irreversible" actions including shutting down programs important to them. While previous shutdowns have had a limited impact on markets, some analysts warned that this time could be more disruptive, given the delicate economic backdrop.

Earlier on Tuesday, a Labor Department report showed job openings increased marginally in August, while hiring and layoffs declined. Another data point showed U.S. consumer confidence declined more than expected in September.

The latest jobs data did not suggest significant job losses, but Mark Luschini, chief investment strategist at Janney Montgomery Scott in Philadelphia, said, "it's a very balanced market that could be tipped either way very quickly." He said the market's leadership mix of defensive sectors such as healthcare and consumer staples along with more cyclical sectors such as industrials showed a lack of "significant conviction directionally."

"Maybe there's some position-squaring in advance of the prospect of a government shutdown," Luschini said. "Were that to occur, and last beyond Friday, we'll start to accumulate significant economic data such as the jobs report on Friday that won't be released. That leaves investors a little bit in the shadows with regard to what's going on on the ground."

The Dow Jones Industrial Average rose 81.82 points, or 0.18%, to 46,397.89, marking its latest record closing high. The S&P 500 gained 27.25 points, or 0.41%, to 6,688.46 and the Nasdaq Composite gained 68.86 points, or 0.31%, to 22,660.01.

For the month the S&P 500 gained 3.53%, for its biggest September percentage gain since 2010 while for the quarter it gained 7.79%, for its biggest third-quarter gain since 2020.

For the quarter, the Nasdaq rose 11.24%, for its biggest third-quarter gain since 2010 and the Dow climbed 5.22%.

For the month the Nasdaq rose 5.61%, and the Dow climbed 1.87%, for its biggest September gain since 2019.

Among the S&P 500's 11 major industry sectors, healthcare was the leader, adding 2.45%. Its biggest gainer was Pfizer, which rallied 6.8% after Trump said it will cut the price of all prescription drugs in the Medicaid program for low-income Americans and sell new prescription drugs at a "most favored nation" price in exchange for tariff relief. Helping other healthcare stocks to rally, Trump also said he expects other drugmakers to follow suit.

The Dow Jones Transportation Average Index fell 0.4%, with airlines leading declines due to the government shutdown threat. A group representing major U.S. airlines had warned on Monday that a partial federal government shutdown could strain American aviation and slow flights, as air traffic controllers and security officers would be forced to work without pay and other functions would be halted. Southwest Airlines shares fell 2.6% while United Airlines lost 2.2%.

In preparation for the shutdown, the U.S. Transportation Department said that more than 11,000 employees at the Federal Aviation Administration, about a quarter of its staff, will be furloughed if government funding lapses at midnight, while more than 13,000 air traffic controllers would be required to keep working unpaid until the shutdown ended.

Earlier in the day, Fed Vice Chair Philip Jefferson warned that the job market could face stress without central bank support, while Boston Fed President Susan Collins said she was open to additional rate cuts.

In individual stocks, chipmaker Wolfspeed surged 29% a day after exiting bankruptcy. Firefly Aerospace shares sank 20.7% following a testing mishap that destroyed the core booster for its centerpiece Alpha rocket.

Lamb Weston shares rose 4.3% after the frozen-potato products maker beat analysts' estimates for first-quarter revenue and profit.

Advancing issues outnumbered decliners by a 1.27-to-1 ratio on the NYSE where there were 352 new highs and 87 new lows. On the Nasdaq, 2,324 stocks rose and 2,367 fell as declining issues outnumbered advancers by a 1.02-to-1 ratio.

Source: Investing.com