Stock Market Rally Ends A Volatile Week
Topline: Despite fears about an economic slowdown resulting in a dismal start to the week, the stock market bounced back in a big way on Friday, boosted by a positive jobs report and increased expectations of another Fed interest rate cut due later this month.
- Despite each index shedding over 3% in the first two days of October, the Dow Jones Industrial Average and S&P 500 rebounded on Thursday and Friday, both rising by over 2% and making up some of the earlier losses. The Dow finished the week down 1% while the S&P 500 was down 0.5%.
- With October as a notoriously scary month for investors, the stock market had a rough beginning to the fourth quarter this week: Both the Dow and S&P 500 shed more than 1% each in back-to-back sessions for the first time this year.
- Signs of weakness mounted in both the manufacturing and services sectors earlier this week. On Tuesday, the Institute of Supply Management (ISM) monthly report showed U.S. manufacturing had contracted for a second month straight, hitting its lowest level in a decade. Then on Thursday, ISM released its report on the services sector, which showed that it had grown at its slowest pace since 2016.
- Despite the other weak economic data, job growth in the U.S. remains a bright spot. With unemployment falling to 3.5%—hitting a fresh 50-year low—the Labor Department’s jobs report on Friday helped spur a late-week market rally.
- More investors are also expecting another Federal Reserve interest rate cut later this month: Fed fund futures show over a 75% chance that rates get cut before the end of October, according to CME Group data.
Here are some of the biggest movers of the week:
- Apple (AAPL) stock was up 2.7%, hitting its highest level in nearly a year and putting the company’s market value back above $1 trillion. Shares rose on the back of an unexpected surge in iPhone 11 demand—CEO Tim Cook said in an interview that sales were off to a “very strong start.”
- The streaming wars continue to heat up: Despite the news that Disney (DIS) would ban all Netflix advertisements on its TV networks, Netflix (NFLX) stock held steady, finishing the week up 3.3%.
- Lyft (LYFT) shares continued to fall, down 5.4% since Monday’s open. The ride-hailing firm’s stock price closed below $40 for the first time since its IPO at $72 earlier this year.
- The race to the bottom continues, when it comes to commissions at brokerage firms. On Tuesday Charles Schwab announced that online trades will be commission-free, and it was quickly followed by rivals TD Ameritrade and E-Trade. This took a heavy toll on shares of discount brokerages across the board this week: Schwab (SCHW) fell nearly 15%, while E-Trade (ETFC) and TD Ameritrade (AMTD) are down 16% and 28%, respectively.
Crucial quote: “We’ve now tariffed our way into a manufacturing recession in the U.S. and globally. What’s the strategy now? Using tariffs as the tool to push back against China was a dumb idea and history will not look kind upon the strategy just as it didn’t for Reed Smoot, Willis Hawley and Herbert Hoover,”—Peter Boockvar, chief investment officer of Bleakley Advisory Group, via Twitter citing the recent dismal ISM manufacturing report.
What to watch for: Top-level U.S.-China trade talks are scheduled to resume in Washington, D.C., next Thursday and Friday.