Sept 27 (Reuters) – The S&P 500 eked out a fractional gain on Wednesday after a see-saw session, as investors weighed whether to start bargain hunting following a sell-off fueled by elevated Treasury yields and uncertainty about the path ahead for interest rates.

Investors were also attuned to developments in Washington as divisions among U.S. lawmakers put the federal government at risk of a partial shutdown by the weekend.

A possible shutdown has added to worries for stock investors as they grapple with benchmark Treasury yields that have climbed to 16-year highs after the Federal Reserve last week signaled a hawkish long-term path for interest rates.

At the same time, as the S&P 500 has sharply pared its year-to-date gain, some investors are wondering if the market is close to a bottom.

“At some point people will start to buy stocks for the fourth quarter, and the third-quarter selling might be almost done,” said Peter Tuz, president of Chase Investment Counsel.

“At a certain level, people are going to get back in thinking the fourth quarter might be a pretty good one.”

The Dow Jones Industrial Average (.DJI) fell 68.61 points, or 0.2%, to 33,550.27, the S&P 500 (.SPX) gained 0.98 points, or 0.02%, at 4,274.51 and the Nasdaq Composite (.IXIC) rose 29.24 points, or 0.22%, to 13,092.85.

During the session, the S&P 500 rose as much as 0.4% and fell as much as 0.8% before paring losses.

Among S&P 500 sectors, the rate-sensitive utilities group (.SPLRCU) fell most, dropping 1.9%. Energy (.SPNY) rose 2.5%, as Brent crude breached $97 a barrel, with the jump in oil prices posing a renewed threat to inflation that has been moderating.

The S&P 500 has fallen about 7% since late July, but remains up over 11% for 2023.

“Investors are looking for a turning point,” said Art Hogan, chief market strategist at B. Riley Wealth. “Clearly, it is not going to take much of a breath of fresh air in this market for people to chase this.”

In Washington, Republican U.S. House Speaker Kevin McCarthy rejected a stopgap funding bill advancing in the Senate, bringing the government closer to its fourth partial shutdown in a decade.

Data on Wednesday showed orders for long-lasting U.S. manufactured goods rose in August while business spending on equipment appeared to regain momentum after faltering early in the third quarter.

Investors are focusing on Friday’s monthly personal consumption expenditures price index for a fresh view of inflation. This week also brings second-quarter Gross Domestic Product and remarks from Federal Reserve Chair Jerome Powell.

In company news, Costco Wholesale (COST.O) shares rose 1.9% after the retailer topped market estimates for quarterly revenue and profit.

Declining issues were roughly split with advancers on the NYSE. There were 56 new highs and 440 new lows on the NYSE.

On the Nasdaq, advancing issues outnumbered decliners by a 1.1-to-1 ratio. The Nasdaq recorded 35 new highs and 333 new lows.

About 10.9 billion shares changed hands in U.S. exchanges, compared with the 10.2 billion daily average over the last 20 sessions.

Our Standards: The Thomson Reuters Trust Principles.

The Guangdong Times Museum in Guangzhou fired the first salvo: in August 2022, the institution, which is backed by a property company, announced the cessation of its exhibition programme. The museum, which opened in the comparably optimistic climes of 2003, is one of the most influential, academic and experimental independent institutions on the Chinese mainland. But, in recent years, it has been forced to operate in an increasingly hostile environment. Its loss, nevertheless, has shaken a Chinese art community already reeling from pandemic restrictions.

Other shocks soon followed: the OCAT chain of property-backed institutions in Beijing, Shanghai, Xi’an and Shenzhen abruptly closed in 2022, Yuz Museum relocated this summer from its enormous converted airplane hangar in Shanghai’s West Bund to a much smaller facility in a remote suburb, and the Shanghai Centre of Photography (SCoP) will close in November after eight years due to the retirement of its founder, the photojournalist Liu Heung Shing. In August, Shanghai’s Long Museum announced a Sotheby’s Hong Kong autumn sale of almost 40 works from its collection, with a value estimated to be between $95.9m-$135.5m. A sale of further works is planned with Sotheby’s New York.

“It does feel like a boom-and-bust process, which is a reflection of the larger economic situation,” says Colin Chinnery, an artist and curator who this year co-founded Beijing’s Sound Art Museum. “Most private art institutions don’t have a solid financial model, especially if they rely on a parent company to pay their bills. The current model seems to be based on the ‘seven fat years’ premise, without considering the lean years that inevitably follow.”

China’s museums face an increasingly chaotic censorship regime as well as the fallout from zero Covid policies, a global downturn and a collapsing property market. The country’s reopening early this year failed to mitigate the damage done by long lockdowns. “Covid caused economic havoc in 2022, which led to a lot of financial stress,” Chinnery says. “The links of the economic chain seem to be broken, which has brought a lot of economic movement to a halt. You can’t move if you don’t have cash to make things happen.”

In the 2010s, China built new museums with a frenzy rivalled only by its urban construction programme. According to the China Museums Association, 1,563 new museums opened between 2009 and 2014. These figures are likely misleading, commentators say: only a fraction of those listed are recognisable as art museums by any definition, and most of those are public institutions backed by national, provincial, municipal or district governments. China, though, was able to boast up to 100 noteworthy art museums by 2020, each launched by private enterprises, primarily in the property industry, or by individual collectors.

Property crash and political upheaval

But the pace of museum investment slowed well before 2020, and some attrition, like the 2019 closure of Redtory Museum of Contemporary Art in Guangzhou, was due to redevelopment. Then came China’s long-anticipated property crash, starting with the 2021 insolvency of the mega developer Evergrande, which eviscerated the life savings of customers who had invested in never-completed constructions. Evergrande’s share price plummeted this August, an event that coincided with the collapse of another industry giant, Country Garden.

Political upheaval is also taking a toll. Censorship is notoriously difficult to document in China, due to fears of repercussions, but, anecdotally, it has been inching up since 2012 and tightened in particular during the Covid years. Unconfirmed tales are whispered over glasses of wine at openings, suggesting that the old adage of simply avoiding the “three Ts” of Tiananmen, Taiwan and Tibet—plus sex—no longer holds true. Material rumoured to have crossed the blurred lines now includes even the art market darlings of 1990s Political pop, as well as references to the Belt and Road Initiative, Sino-American relations, the Second World War or even title mistranslations deemed unpatriotic. Private museums have purportedly been instructed to display more pro-government and patriotic shows around anniversaries like the October National Day.

“Now there is no clear red line,” says a former associate director at several private museums, speaking on the condition of anonymity. “The mechanism has changed; before, you apply and you are or aren’t approved, officials will say this may not be appropriate, or will tell you to be careful about a certain aspect of the exhibition. Now censorship is based on reports by anyone who comes in and is uncomfortable with anything. It is very tricky.” In June 2021, a public outcry about Song Ta’s 2013 video Uglier and Uglier, ranking school girls, closed OCAT Shanghai for months. In 2022, at UCCA in Beijing, a visitor complaint got Li Songsong’s painting of a Japanese kamikaze jet removed.

Nevertheless, some museums report that room for negotiating with local censor bureaux remains more open than it seems from the outside. At Beijing’s Sound Art Museum, censorship is “not such an issue for us”, Chinnery says, with a museological, knowledge-based permanent exhibition. “Our contemporary shows are more abstract than visual art. Things have certainly become tighter in recent years, but it changes all the time.”

Even before the bust, short-term profit motives have proved to be the most limiting form of self-censorship. Nikita Cai, the chief curator of Guangdong Times Museum, who has remained with the now-downsized project, highlights the popularisation of solo shows and imported package exhibitions. “Wherever you see this model of less curated, mainly painting exhibitions, it is a sign of a market turning more conservative,” she says. “China has another model of exhibition, of imported package exhibitions without any local conversation or mediation. It’s dominant now.” She describes a loop where “people think imported art is good art, museums think this is the kind of exhibition visitors are willing to pay for, what they think is the Western canon. It’s more welcome and digestible, and with the opinions and histories already written it is easy to translate without any challenges”.

“Never independent entities”

As in Western museums, the need for money reigns supreme. “Behind those two models is income, a certain thinking of art as a potential investment and speculation,” Cai says. “It is completely taking over.” She has observed this trend for the past five years, escalating during Covid as art became more popular as an investment vehicle.

“Private museums are never independent entities,” says the anonymous former director. These museums often have licences tied to a parent company that guarantees funding of around $275,000 a year. “The regulation defines it as a parasite, because it has to have someone feeding it every year,” the former director says. Some museums set up as holding groups, with sub-companies for things like education and gift shops, but end up with “the logic of commercial companies” focused on profits to the expense of the institution’s original mission and vision, they say. Those with deeper pockets think little else is needed in terms of staffing or strategy. “These larger institutions think they can compete with Tate, the Met or MoMA with just an out-of-the-blue plan and some money,” they say. A few of the museums are notorious, locally, for ‘flipping’ works to private collectors. While these are outliers, most Chinese museums welcome gallery-funded exhibitions and auction house partnerships and often turn a blind eye to private sales of works on show in an exhibition, often on site. “Meanwhile curated, academic, professional shows get increasingly squeezed out,” the former director says.

Private museums do get some state support, sometimes substantial, but it tends to flow to the flashier institutions that need it least. Cities like Shanghai and Shenzhen have introduced new legal categories for fine art exhibition spaces, legalising less conventional and dual-use projects, “like exhibitions in airports, or wine bars”, the former director says. “It is an attempt to offer more support for these kind of spaces”—and, invariably, more control.

The Beijing Municipal Government has started offering a special “Category Museum” status to projects like the Sound Art Museum, Chinnery says, “which isn’t quite the same as full museum status, but it does mean we are part of a system of institutions recognised by the government”. The status allows the museum to collaborate with state environmental federations to record audio footage, for example, in national parks, or to conduct research in hospitals or universities. “We need official status to work with these professional bodies,” he says.

Despite the losses of gems like the Times Museum and SCoP, most leading boom-era private museums are plodding away through these lean years, including the Ming Contemporary Art Museum and the HOW Art Museum in Shanghai, and UCCA and M WOODS in Beijing (with branches in other locations), as well as public institutions like Shanghai’s Power Station of Art and the Museum of Art Pudong. The private Shanghai venue Rockbund Art Museum, under new leadership from Liu Yingjiu and X Zhu-Nowell, has rebounded this year from a renovation closure with a series of bold solo shows by emerging queer Asian women such as Tosh Basco and Evelyn Taocheng Wang. Projects such as the Start Museum in Shanghai and the TAG Art Museum in Qingdao launched recently after long delays, while the photography institution Fotografiska will open a Shanghai branch later this year. The anonymous former director believes a new model of smaller, more specialised, grassroots entities will emerge.

“The 2008 financial crisis was a good thing for the Chinese art world,” Chinnery says. “It got rid of the investing froth poisoning the situation and cleared the way for a new situation to emerge.” Something similar is now happening, he says. “I hope this will force institutions to think of new financial models, and we can create a new art ecosystem.”

The art business can be unpredictable, especially in New York. We asked several art dealers how they stay afloat — and how much it costs to do so.

​​Without galleries — the point of entry for both artists and buyers — there would be no art market. But these businesses are also legendary for their lack of transparency. Information, especially about finances, seems opaque ​and secretive by design​.

​​With this in mind, we set out to learn the ​​basic mechanics of running a gallery in New York​ City circa 2023 ​— what it costs, for everything from rent to insurance to other, less ​anticipated ​​expenses​. New York was a natural area of focus, as it is home to more than 760 galleries with at least one paid employee; that’s 16 percent of all similar galleries in the U.S., more than any other city, according to a 2020 analysis by the art economist Clare McAndrew. While much attention in the press is ​​lavished on the handful of megagalleries routinely selling multimillion-dollar paintings, we focused on a group of art dealers with five or fewer full-time employees who are more representative of the small or midsize businesses that make up most of the industry.

1. Take the leap.

Opening a gallery is a bit like becoming an artist. If you’d be happy doing anything else, those with experience say, don’t do it. “It’s a goat rodeo every day,” says dealer Cristin Tierney, 52. “Good thing I love goats.”

Most dealers get into the game for a simple reason: They want to help build the careers of the artists they love and help other people fall in love with them, too. Along the way, they pick up a skill set that ranges from charming wealthy collectors by night to applying drywall by day.

The amount of start-up capital needed varies. ​After several years working at a Chelsea gallery, Rachel Uffner, 45, set out to open her own space in 2008. She sold art informally on the side and cobbled together about $125,000: a mix of small business loans, revenue from ​the​ sale of art ​​​​to a corporate collection, and $25,000 her parents had been saving for her wedding. Jasmin Tsou,​ 38,​ the founder of JTT gallery in Tribeca, started out in 2011 with a $2,000 loan from her former employer, ​the dealer Michele Maccarone.​ It was enough to pay for a tiny booth at an art fair, where she ended up selling more than 30 works.

2. Find a space.

Like any other business, galleries are all about who you know. Some dealers sublet their first space from a supporter or friend at well below market rate.

​​An artist offered to rent Tsou a 500-square-foot gallery on the Lower East Side for $3,000 a month as long as she agreed to clean out the trash that had piled up inside. “The trash was drywall, studs, paint, plaster — I used all of that to build the space out,” Tsou recalls. ​“If the universe had not opened every single door at every moment, I don’t know if I would have done it.”​ Other dealers hit the pavement for months in order to find that elusive mix of good bones, good vibes and a good price. “I must have looked at 40 spaces,” said Helena Anrather, ​36, ​who opened up shop in Chinatown in 2017.

These days, rents can be eye-watering. Jonathan Travis, a partner at Redwood Property Group, estimates that the average ground-floor gallery space in ​West ​Chelsea or TriBeCa costs around $100 per square foot. ​On the Upper East Side, rents can cost up to two or three times as much​, making it “the most expensive gallery district in the city,” Travis says​. ​(Prices for upper floors in the neighborhood are more comparable to those in Chelsea and TriBeCa.) ​The most affordable option for a dealer starting out in Manhattan is an upper floor in Chinatown, which could cost, at the lower end, $​5,000 ​​a month. But even that requires serious investment. A first-time business owner, Travis warns, should be prepared to put down a security deposit of as much as eight months’ rent, though that number too will vary depending on the neighborhood.

3. Build a roster of artists.

Often, dealers start out mounting shows of work by friends or acquaintances before looking farther afield. Open studio events, art-school graduate shows, Instagram, international biennials — all are frequent hunting grounds for new talent. Rachel Uffner met Curtis Talwst Santiago, a Canada-born, Munich-based artist who creates tiny dioramas inside jewelry boxes, while he was doing a residency at the art space Pioneer Works in Brooklyn. “We’re lucky in New York because a lot of people come to us,” Uffner says.

​​​The artist-gallery relationship is a bit like dating. Young artists might work with a number of art dealers casually — contributing a painting to a group show or art-fair booth, for example — before committing to something more serious, like a solo show. Only then might they agree to formal representation, in which a gallery becomes the artist’s official agent. ​​​“You have that status conversation — ‘What are we?’” Anrather says. “It’s important to be clear about one another’s goals.”

​​​​Galleries make introductions to curators and other influential art-world tastemakers, shape the career trajectories of the artists they represent and generally split sales proceeds 50-50. One or two highly successful artists can sometimes drive a large portion of a gallery’s profits, which makes it all the more stressful when a megagallery like Gagosian or David Zwirner — which offer considerably more resources and better infrastructure — woos them away. Still, smaller dealers may try to strike a deal to share representation. “At the end of the day, if David Zwirner or Hauser [& Wirth] comes to an artist I work with and says, ‘We’re going to have a show,’ what am I going to say? No?” asks the dealer Charlie Moffett, 38. “There is this tacit understanding that if a bigger gallery does offer them an opportunity, they would like to find a way to keep working together … but you can’t hold on too tight.”

4. Find your people.

A gallery is more than just the artists it represents — it’s also the community of​ people who keep the operation going. That cast includes art handlers (who get the art from place to place and install it safely), directors (who sell art to collectors and serve as the main point of contact for artists), registrars (who keep track of art as it travels from, say, gallery storage to a museum or to a collector’s home), and fabricators (who help artists with highly technical production). Anrather noted somewhat sheepishly that her director, Megan Yuan, started out as an unpaid intern; her role — and salary — grew alongside the business. (Yuan was sent over unannounced by a gallery in the neighborhood that had overestimated the number of interns it could accommodate that day.) The market rate for a director at a midsize gallery varies widely, according to dealers: between $60,000 and $120,000, plus perhaps a 10 percent ​commission on each work they sell, based on the gallery’s profit, or a bonus predicated on the gallery’s total annual revenue. ​​

5. Build your network of collectors.

It takes fewer collectors than one might think to keep a gallery afloat. “In any given year, you are selling a huge percentage of what you sell to a handful of people,” says Tierney, who founded her gallery in 2010. Some dealers can rely on a core group of a dozen or more supercollectors who consistently buy art from multiple exhibitions a year, and many more who make one or two purchases over the course of a decade. As Tierney put it: “I have had times where someone who I met at a panel discussion 10 years ago sends me an email out of nowhere and says, ‘How much is that?’”

6. Get your priorities straight.

Art dealers have to make decisions about where to spend and where to save. Rather than renting out a​n expensive​​ Chelsea restaurant for a post-opening soiree, which can cost more than $15,000, many young dealers opt to ​​​​celebrate ​their artists with beer and pizza at a nearby bar for less than $2,000. Few work with specialist PR firms, which can charge as much as $10,000 a month. Anrather turned the gallery’s defunct ​elevator shaft into “extremely compact storage” to minimize her off-site storage fees. Kendra Jayne Patrick, who founded her itinerant gallery in New York in 2018 and opened a brick-and-mortar space in Bern, Switzerland, last year, says she often takes advantage of certain European airlines’ generous luggage policies to cut down on art shipping costs, and uses those savings to fund complex installations.

Dealers say some things are still worth splurging on, like photography of every exhibition ($1,000 to $3,000 a pop). Several invest in catalogs, essays and scholarly research on gallery artists ($15,000 to $50,000 a year). Tierney sets money aside for travel to small cities where collectors and curators rarely get house calls ($20,000 a year). Moffett covers half of his qualifying artists’ health insurance; Polina Berlin, 38, who founded her Upper East Side gallery last year, fronts money for top-of-the-line materials. “I went to pick up handmade watercolors and ended up putting $2,500 worth of paint on my credit card,” she says. “My jaw dropped.”

7. Figure out your art fair strategy.

Art fairs are a necessary part of the gallery business: They drive anywhere from 10 to 40 percent of all revenue, according to dealers. If a gallery offers market-friendly material (which usually means attractive paintings), it can pocket more than $250,000 in just a few days (though travel, booth fees and other expenses can easily exceed $50,000).

Some small and midsize galleries are working to limit their reliance on fairs. The Bogotá, Colombia-based Instituto de Visión decided to open a location in New York in 2021 in part to increase international exposure for its artists, and to be more discerning about the number of fairs in which the gallery participates. Still, many businesses find them necessary, if not exactly desirable. “As someone put it to me recently, ‘With art fairs, the house always wins,’” Anrather says.

Other dealers have begun approaching fairs as vehicles for exposure rather than sales. “We pick one fair a year where we say, ‘This comes out of our PR and marketing budget,’” Tierney says. Last year her gallery presented a complex seven-channel installation by the video art pioneer Mary Lucier at the Frieze Masters fair in London. It didn’t fly off the shelf, but it raised the artist’s profile in a way an ad rarely does.

8. Expect the unexpected.​​

Dealers quickly learn that it’s important to leave some buffer in the budget. “Nobody sits you down and tells you about the fines,” Uffner says. ​“You get fined for stuff you didn’t even know you needed to do.” (For example, Gagosian Gallery was fined $4.28 million in 2016 for failing to properly administer New York sales tax on art shipped to and from the state.) Uffner’s gallery recently paid $7,000 to settle a lawsuit over its website, which a plaintiff claimed was not in compliance with the Americans With Disabilities Act. Then there are other unforeseen costs, like the $5,000 she paid to ​​get an emergency replacement for the gallery’s hot water heater.​​

The patchy and unpredictable nature of the gallery business means that in order to be successful, you have to see the job as a calling. “I do this because I want to live in a world where people feel supported to make things,” Tsou says. “It’s a bizarre thing we do as humans, and also one of the most beautiful.” In a testament to the precarity of the business, shortly following this interview, JTT abruptly announced it was shutting down after 11 years.

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What Does It Cost?

The gallery business can be extremely volatile. In a slow month, a dealer might be uncomfortably in the red; in a busy month, they might accrue enough revenue to cushion them for the rest of the quarter. And one sale could make the difference between a good month and a lousy one.

The below is a sample budget for a small-to-midsize gallery during a particularly busy month of sales. (Opening an exhibition and participating in an art fair in a four-week stretch is the exception rather than the rule, but both are included here to offer a broad cross-section of a gallery’s activities.) The figures are a composite sketch, reflecting an average of the numbers shared by the sources interviewed.

Shipping: $3,500
Storage: $2,500
Director’s salary: $10,000
Rent: $12,000
Art fair: $50,000
Opening dinner: $2,500
Exhibition photography: $2,000
Exhibition catalog: $5,000
Insurance: $3,500

Total Costs: $91,000
Total Monthly Revenue: $295,000
​​Total Profit: $204,000 ​​