Stocks Rise As Dip Buyers Fuel Wall Street Rebound: Markets Wrap

The S&P 500 halted a two-day loss, showing signs of recovery driven by positive results from major companies. Market participants were optimistic as they chose to focus on the strength of Corporate America despite fluctuations in economic data and uncertainty surrounding one of the most competitive elections in US history.

The S&P 500 stopped a two-day decline, propelled by encouraging signals from leading corporations. Notably, tech giants that had recently experienced significant sell-offs led the market's gains on Friday. For instance, Amazon.com Inc. saw a surge of 6.2% following positive earnings, while Intel Corp. increased by 7.8% thanks to a favorable outlook. Both Exxon Mobil Corp. and Chevron Corp. exceeded profit, production, and sales expectations. Additionally, Boeing Co. climbed 3.5% amid hopes that a prolonged strike is nearing resolution. Conversely, Apple Inc. dropped 1.2% after offering a lackluster forecast.

Traders on Wall Street seemed undeterred by a jobs report indicating US hiring increased at the slowest pace since 2020 in October, while the unemployment rate remained low. The report showed distortions due to severe weather events and an ongoing labor strike. This jobs report comes at a critical time as it is the last major data release ahead of next week’s Federal Reserve meeting and the presidential election on November 5.

As noted by Bret Kenwell at eToro, “We’re in the midst of a hectic stretch with economic data, earnings, the Fed, and the US election. Some volatility is expected around these events, but the fundamental view remains unchanged for the long term.”

Notably, the S&P 500's increase of nearly 20% through October was the strongest in a presidential election year since 1936, according to strategists from Bespoke Investment Group. Historically, such substantial gains have led to stronger-than-average performances in the latter part of the year.

On Friday, the S&P 500 rose by 0.4%, helping to reduce this week’s losses, while the Nasdaq 100 and Dow Jones Industrial Average each increased by 0.7%. Additionally, a metric tracking the "Magnificent Seven" tech giants rose by 1.1%.

Treasury yields climbed after an earlier drop, as traders maintain expectations that policymakers will cut rates by a quarter-point on November 7 and again on December 18. By year-end, traders are pricing in about 44 basis points of cuts, with expectations for less than 60 basis points by the end of January, suggesting a potential pause by officials early next year.

10-year Treasury yields advanced nine basis points to 4.37%, and the dollar strengthened as oil prices slightly increased due to reports of possible Iranian attacks on Israel from Iraq, although crude ultimately closed the week lower with doubts about supply disruptions.

The complicated jobs report provided additional evidence that the labor market is slowing from previously overheated levels, supporting the case for Federal Reserve officials to continue easing the restrictive rates implemented to combat inflation. Tiffany Wilding of Pacific Investment Management Co. commented, “We still believe the Fed will follow a gradual pace of rate cuts, starting with 25 basis points next week and possibly another 25 in December.”

In the view of Ian Lyngen from BMO Capital Markets, the disappointing employment figures may deter any shift in the perception of the labor market. As Lindsay Rosner of Goldman Sachs Asset Management noted, “The Fed is likely to attribute some weakness in today’s data to one-off circumstances, but the underlying softness supports the argument for continued rate reductions.”

Seema Shah from Principal Asset Management suggested that markets might set aside the jobs data considering the influence of hurricanes, while Rick Rieder from BlackRock stated that the Fed is prepared to adjust policies based on a slew of upcoming economic data.

US mutual funds have reported their lowest cash holdings since 2015, indicating growing bullish sentiment towards equities in sync with the initiation of the Fed’s easing cycle, according to Bank of America strategists. Their analysis also showed an uptick in equity allocation among average Wall Street strategists.

Deutsche Bank strategists noted remarkable inflows into equity and bond funds over the past year, with over $500 billion entering equity markets. This influx correlates with strong economic growth and a rising risk appetite, suggesting that bullish trends will likely continue.

Corporate highlights included Dish Network Corp. facing pushback from creditors regarding a revised bond-exchange offer needed for its acquisition by DirecTV. Meanwhile, B. Riley Financial Inc. is set to sell part of its wealth management business, and BYD Co. reported record monthly car sales amidst a peak buying season in China. Additionally, Charter Communications Inc. saw its shares rise after reporting fewer broadband subscriber losses than expected, and Reckitt Benckiser Group Plc surged after a favorable court ruling.

Stocks, Market, Economy