(Justin Vaughn, Editor, Options Trading Report)
The September Jobs report was better than expected, surprising economists and even the Fed and snuffing out any speculation of another half percent rate cut. Recession thoughts are disappearing as the labor market charges ahead. The unemployment rate has remained steady at near 4.1%, with 254,000 jobs added in September. As the Labor Market continues to ‘chug-along’ with no signs of weakening, and inflation cooling, prospects for Mr.Powell’s hopes for ‘soft-land’ appear realistic. Stocks closed the week stronger with the Dow Jones Industrial Average up 0.8% or near 300 points. The heavy-tech Nasdaq Composite barrelled ahead 219 points or 1.2%. Beating all indexes, the Russell 2000, made up of smaller-cap value stocks, was up strongly at 1.5%, as investors were buying ‘with gusto’ smaller ‘no-name ‘ stocks. Treasuries were active, nudging 4% with the yield on the 10-year hitting 3.980%, the biggest weekly gain in over a year. Oil continued to climb higher as Middle East tensions continued to worsen. The Israeli-Hamas conflict has now widened to involve the Yemen Houthis, Hezbollah in Southern Lebanon and Iran, a major supplier of weapons to all combatants fighting Israel. With the many fronts of fighting Israeli military is stretched to the breaking point as the country is nearly fully mobilized for war. Brent crude is up over 10% the past week, presently hovering at $78.00 a barrel range.
After closing at record highs last week the indexes sold off Monday as high techs weakened. The Magnificent 7 led all techs and chips downward with the tech-heavy Nasdaq Composite giving up 1.2%. The Dow Jones Industrial Average fell 400 points. Oil futures crept up as worries of impaired oil production could result as threats to oil-fields by the Iranians caused fear. The Bond market was active Monday as the 10-year Treasury yield finished over 4%.
Tuesday’s market opened soft early on, then ‘woke-up’ with the Mag 7 and like stocks leading a nice rally, fueled with fresh economic data and looking forward to Thursday’s CPI release and Friday’s University of Michigan’s Consumer’s Sentiment Survey for October. The expected data, measured by economists and analysts, is anticipated to be positive leaning, and hopefully ‘blessing’ the market. The 10-year Treasury yield did climb over 4%, reaching 4.039%. “What we’re cautioning investors is not to read too much into each data point,” said Todd Walsh, CEO and Chief Technical Analyst at Alpha Cubed Investments. “The Fed seems to be on the right track from what we’re looking at.” Hong Kong’s Hang Seng Stock Index fell 9.4% after the economic plan and stimulus Xi Jinping laid out to revitalize China’s poor economic conditions has not had traction and lacks attention to many areas of concern. The market snapped back Wednesday, turning positive, with the Nasdaq Composite jumping 259 points, closing at 18182.52. Both the Dow Jones Industrial Average and S&P 500 were near records at the session’s finish.
The CPI (Consumer Price Index) released Thursday early morning was a bit higher than economists expected, up 0.2% to an annualized 2.4% rate. Economists had predicted a 2.3% rate. All indexes reacted negatively, all finished in the red. The Social Security Administration announced that benefits will rise 2.5% next year for the 72 million senior collectors.
RUMBLINGS ON THE STREET
Jim Baird, chief investment officer at Plante Moran Financial Advisors, Barron’s – “Can job creation and labor conditions maintain solid momentum as the Fed gradually takes its foot off the brake, said Mr. Baird. “There’s very little in the September jobs report to suggest that it can’t.”
Bill ackman, hedge fund ‘honcho’ at Pershing Square, Barron’s – “Uncertainty, war, and restrictive monetary policy are a treacherous environment for a soft landing.”
Roger Ferguson, Former Vice Chairman of the Federal Reserve, Barron’s – “Falling inflation is slowing down the rise in prices. It isn’t bringing prices back to the level of two or three years ago.”
Donald Rissmiller, partner at “If we lookResearch firm Strategas, WSJ – “If we look at the lower income consumer, there are signs of strain’” Mr.Rissmiller related, “But if we take aggregate consumer spending, the whole thing, we are marching on month after month.”