Bulls Storm Into October
October 3, 2022
It was a rip-roaring start to October today as weak economic data kick started a relief rally that ended with the major averages sharply higher. Bad news was good news as the ISM Manufacturing Index came in at 50.9 vs. 52 estimated and 52.8 the prior month. New Orders fell to 47.1 from 51.7 prior. Construction Spending fell -0.7% vs. -0.3% as expected. Yields dropped and equities spiked. The 10-year rate slipped to 3.59% before landing at 3.64%, while the two-year yield fell as low as 4.06% before closing at 4.11%. Giving stocks a second boost in the afternoon was New York Fed President John Williams saying in a speech that he expected inflation to fall sharply next year to around 3% before easing to the Fed's stated goal of 2% the following year. The rally was broad based with every sector higher led by a +5.65% jump in Energy (XLE) after OPEC said they would cut production to keep prices higher. Materials (XLB), Technology (XLK) and Industrials (XLI) were all up more than 3%. The DJIA gained almost 900-points before closing with a gain of 765.38 points (+2.66%) at 29490.89, while the S&P 500 jumped 92.81 points (+2.59%) to 3678.43. The NASDAQ picked up 239.82 points (+2.27%) finishing at 10815.43.
Breadth was bullish with advancing issues beating declining issues 4.8:1 on the NYSE and 2.7:1 on the NASDAQ. Advancing volume was 88% on the NYSE and 79% on the NASDAQ. The VIX fell 01.52 (-4.81%) and closed at 30.10. Crude oil prices jumped 3.72 (+4.68%) and the November contract closed at $83.21 a barrel. Gold prices increased 37.60 (+2.25%) and finished at $1709.60 an ounce. Bitcoin (BTC) closed the session at $19,500.
Stocks rallied on hopes that today's data could cause the Fed to slow in hiking rates, but one day's data won't change anyone's mind. The market was overdue for a relief rally after a dismal September and we could see some follow through, but earnings estimates are about to be trimmed and will weigh on stocks going forward.
Earnings releases to watch for on Tuesday include: Acuity Brands (AYI), Novagold Resources (NG) and SMART global Holdings (SGH).
Tuesday's Market Moving Economic Calendar: Motor Vehicle sales, Factory Orders and JOLTS.
By David L. Blake, CM