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04.11.2024 08:06 AM
The major Wall Street indices closed higher on Friday, recovering from the previous day's sell-off as Amazon's strong earnings offset significant concerns over October's U.S. job growth slowdown.
Amazon.com (AMZN.O) shares jumped 6.2% after the company reported strong retail sales and profits exceeding Wall Street forecasts. This growth provided a major boost for investors, easing the overall negative sentiment in the market.
Meanwhile, Apple (AAPL.O) slipped 1.2%, with investors worried about the company's declining sales in China in the last quarter. The dip in sales in its largest Asian market caused concern among shareholders, slightly dampening the market's overall enthusiasm.
Stocks of other members of the "Magnificent Seven" — like Meta Platforms and Microsoft (MSFT.O) — also came under pressure after the companies reported high expenses on artificial intelligence infrastructure. These costs negatively impacted the Nasdaq (.IXIC) index on Thursday, leading to a short-term dip.
"The start of a new month often brings fresh optimism among investors, especially after yesterday's drop and strong reports from Apple and Amazon," said Sam Stovall, Chief Investment Strategist at CFRA Research. This optimism appears to have helped the market overcome temporary slumps.
Despite weak employment data, which showed only 12,000 jobs added in October (well below the forecast of 113,000), the market did not take this as a reason for panic. Market participants attribute the weak numbers to temporary factors, such as hurricanes and strikes, and remain confident in labor market stability, with the unemployment rate holding steady at 4.1%.
Published employment data did not dampen optimism, and investors remain confident that the Federal Reserve will lower interest rates by 25 basis points in November. This move is seen as a likely catalyst for maintaining positive market momentum.
"Key factors in the near term will be quarterly earnings, interest rates, and upcoming elections," noted Sam Stovall, CFRA Research's Chief Investment Strategist. In his view, these events will have a decisive impact on investor sentiment and index movement in the coming weeks.
Friday's trading showed a confident rise on Wall Street: the Dow Jones Industrial Average (.DJI) added 288.73 points, or 0.69%, closing at 42,052.19. The S&P 500 (.SPX) rose 23.35 points (0.41%) to 5,728.80, while the Nasdaq Composite (.IXIC) grew by 144.77 points, or 0.80%, reaching 18,239.92. However, the weekly results were less encouraging: the S&P 500 lost 1.38%, Nasdaq fell 1.51%, and the Dow declined 0.16%.
The upcoming U.S. elections are drawing increasing attention from investors, who predict a tight presidential race. Uncertainty surrounding the possible outcome is adding further fluctuations to the market, especially considering that the Fed's meeting is scheduled for the day after the vote. This combination of political and economic factors raises pressing questions for market participants.
Amazon's strong results boosted the consumer goods sector (.SPLRCD), which rose 2.4%, reaching a two-year high. Alongside Amazon, Intel (INTC.O) shares surged by 7.8% due to a better-than-expected revenue forecast. This led the semiconductor index (.SOX) up by 1%, signaling a stable interest in technology despite overall volatility.
Chevron (CVX.N) shares rose 2.8% following the release of its quarterly report, which exceeded analyst expectations due to increased oil production volumes. The data showed strong company growth amid a volatile market, boosting investor interest in the energy sector.
On the New York Stock Exchange (NYSE), declines dominated: stocks losing value outnumbered those rising in a ratio of 1.21 to 1. However, the NYSE recorded 88 new highs and 93 lows, indicating a wide range of positions on the market.
The S&P 500 index recorded ten new 52-week highs and six lows, while the Nasdaq Composite saw 67 new highs and 123 lows. Total trading volume on U.S. exchanges reached 12.13 billion shares, higher than the 20-day average of 11.71 billion, reflecting increased activity amid investor expectations.
U.S. Treasury yields initially declined following the October employment data, which showed minimal job growth. However, economists attributed this to temporary factors — aerospace sector strikes and hurricane impacts — which softened the impression of weak results. Meanwhile, the unemployment rate remained steady at 4.1%, indicating labor market stability.
After trading ended, news emerged that Nvidia (NVDA.O) would be added to the Dow Jones Industrial Average, replacing Intel (INTC.O). This news immediately impacted both companies' share prices: Nvidia shares rose 1.9% in after-hours trading, while Intel dropped 1.4%.
Just days before the U.S. elections, polls show that Republican Donald Trump and Democratic Vice President Kamala Harris are nearly tied. This close competition adds further pressure on the markets, which predict fiscal policy uncertainty if either candidate wins.
Some analysts warn that regardless of the election outcome, the U.S. fiscal trajectory may deteriorate under either of the candidates. Potential changes in tax and budget policies raise concerns among investors, who anticipate economic challenges ahead.
The yield on the 10-year U.S. Treasury bond reached 4.361% — the highest level since July, up 7.7 basis points. This rise follows a 48-basis point increase in October, marking the biggest monthly gain since April. This trend reflects the market's heightened expectations around potential economic policy shifts.
"We've gone through the quarterly reports of major tech giants, and overall, they've exceeded expectations in many cases," noted Rick Meckler, a partner at the family investment office Cherry Lane Investments in New Jersey. "The recent sell-off was unwarranted, and investors decided to return to the market."
The MSCI World Index (.MIWD00000PUS) gained 2.85 points, or 0.34%, reaching 835.15. The European market also posted strong growth, with the STOXX 600 index ending the day up 1.09%, marking its largest one-day gain in five weeks. Banks led the surge, recovering recent losses.
The U.S. dollar regained strength, rising against the euro and several major currencies. Investors and traders responded to fresh employment data, adding confidence to the dollar and solidifying its position in the global currency market.
The euro fell 0.40% against the dollar, reaching $1.084, while the dollar index (.DXY), which tracks the greenback against six major currencies, rose 0.36% to 104.24. This rise underscores the dollar's steady strengthening amid heightened global market volatility.
The dollar also rose against the yen, climbing 0.60% to 152.94 ahead of Japan's three-day holiday. This increase was influenced by recent remarks from Bank of Japan Governor Kazuo Ueda. His statements were less "dovish," providing temporary support for the yen earlier in the week, but the market ultimately favored the dollar.
The cryptocurrency market also saw gains, with Bitcoin, the largest digital currency by market cap, increasing by 0.57% to reach $69,531. Investor interest in cryptocurrencies remains steady amid global economic fluctuations.
Oil prices continued to climb amid reports that Iran is preparing to launch a retaliatory strike against Israel, possibly from Iraqi territory. This geopolitical tension supports oil prices, adding risks for a region already embroiled in a broader conflict, which began with hostilities in Gaza.
Brent crude futures rose 29 cents to $73.10 per barrel, while U.S. West Texas Intermediate (WTI) added 23 cents to $69.49 per barrel. These fluctuations in the oil markets are tied to concerns about supply security and uncertainty over the potential expansion of the conflict.
Gold prices dipped slightly as the dollar's strength reduced the appeal of the precious metal to investors. In a strong U.S. dollar environment, gold has become a less attractive hedging asset, leading to a slight price drop.
Next week, the markets anticipate two significant events that could reshape investor sentiment: the U.S. presidential election and the Federal Reserve meeting, where interest rate adjustments will be discussed. These decisions will be key indicators for market participants, setting the course for the financial sphere.
The November 5 vote concludes an intense presidential race that the entire country has closely followed, impacting financial markets. "Trump trades" — deals focused on boosting assets that may benefit under a Trump presidency — have led to substantial market fluctuations, reflecting investor sentiments anticipating success for the Republican candidate in his contest against Democrat Kamala Harris.
Current market strategies include the dollar's rise and Treasury bond sales, partly tied to strong economic data and hopes for cryptocurrency deregulation if Trump wins. Optimism around Bitcoin has also grown, as many investors speculate that a Republican victory might ease regulatory pressure on the crypto sector.
Despite some speculations on potential election outcomes, polls indicate nearly equal chances for both candidates. Betting on Trump has tapered off at the week's end, and markets are bracing for volatility on voting day, regardless of the results.
Walter Todd, Chief Investment Officer at Greenwood Capital, notes that any election outcome could introduce short-term risks. "A Republican victory could lead to profit-taking and stock sales as investors seek to lock in gains," Todd explained. On the other hand, a Harris victory might trigger a more significant correction, as the market anticipates a stricter approach to business regulation and tax policy.
The Tuesday vote will not only decide the next president but also control of Congress, adding another layer of uncertainty for investors trying to anticipate how different political outcomes might affect long-term asset performance. The two candidates offer contrasting paths for the economy, which is reflected in sector-specific forecasts.
The prospect of deregulation under Trump appeals to the banking sector, which could gain from a more favorable regulatory environment. Additionally, his agenda's higher tariffs could support small-cap companies focused on the domestic market, though this could also add volatility to broader markets.
Analysts suggest that Harris, who actively backs clean energy initiatives, could give a strong boost to solar and renewable energy stocks if elected. Investors see this as a growth opportunity, especially as the world shifts toward sustainable energy.
Investors fear that a close race could lead to prolonged uncertainty or a contested result. The 2020 experience, where Trump attempted to challenge election results, raises questions about possible delays and heightened market volatility. "The market did well under Trump, but it can adapt under Harris as well," noted Robert Pavlik, Senior Portfolio Manager at Dakota Wealth. "What we need most is clarity."
Amid the tense election cycle, investors' attention is also focused on the Federal Reserve meeting set for Thursday. The market anticipates fresh signals on interest rates, and this decision could pose another challenge for the S&P 500 index, which has gained nearly 20% since the start of the year. However, October proved challenging for the index, which declined after five consecutive months of growth, largely due to mixed financial results from major tech companies.
Federal fund futures indicate that the U.S. Federal Reserve is expected to cut its key rate by 25 basis points, according to LSEG data. This will mark the second rate cut following September's decision, the first in four years.
For investors, the upcoming Fed meeting's main focus will be on the stance of Fed Chair Jerome Powell. He is expected to clarify how the economy could influence future policy and may raise the possibility of pausing the rate cut cycle. This issue gains importance amid the steady release of positive economic data.
The Citigroup Economic Surprise Index (.CESIUSD), which tracks how economic data meets or exceeds forecasts, has reached its highest level since April. Data released this week shows robust U.S. economic growth at 2.8% in the third quarter, a positive signal for market participants.
However, Friday's monthly jobs report indicated that job growth nearly stalled in October. This result diverges from the overall positive trend, but economists note that the data was skewed by temporary factors, such as aerospace sector strikes and hurricane impacts, affecting payroll survey responses.
JPMorgan economist Michael Feroli remarked that this week's data still supports the need for rate cuts. "Even if the election results are clear by Thursday, uncertainty remains high enough to justify a cautious approach from the Fed on future guidance," Feroli wrote in a research note, underscoring the importance of a balanced approach amid instability.
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