Wall St rallies as data, RBA move lifts hope of Fed easing

It was second consecutive grand slam day with the indexes shooting way up on reports that the labor market was starting to cool, that the gap between the unemployment rate and new job openings was narrowing with openings falling by the most in 2-1/2 years, showing the Fed’s mission to bring down inflation was working. This brought new hope that the pace of rate hikes may start to slow even though the San Francisco Fed prez today said that we need more rate hikes. This is being called a relief rally rather than a new bull market but, whatever you call it, it is a relief coming on the heels of the worst September in 2-1/2 years and now we’re seeing the biggest one-day gain in the S&P in 2-1/2 years.  Volume was brisk at 12.5 billion. 

Tue  October 4, 2022  4:38 PM

Wall St rallies as data, RBA move lifts hope of Fed easing

By Herbert Lash, Ankika Biswas and Bansari Mayur Kamdar

DJ: 29,490.89  +765.38        NAS: 10,815.43  +239.82        S&P: 3,678.43  +92.81     10/3

DJ: 30,316.32  +825.43        NAS: 11,176.41  +360.97        S&P: 3,790.93  +112.50   10/4

Oct 4 (Reuters) - The S&P 500 index (.SPX) posted its biggest single-day rally in two years on Tuesday after softer U.S. economic data and Australia's smaller-than-expected interest rate hike stirred hope for less aggressive tightening by the Federal Reserve.  While labor demand remains fairly strong, U.S. job openings fell by the most in nearly 2-1/2 years in August in a sign the Fed's mission to tame inflation by hiking rates was working to slow the economy. read more  Earlier, the Reserve Bank of Australia surprised markets with a smaller-than-expected interest rate hike of 25 basis points. Its cash rate rose to a nine-year peak after six rate hikes in as many months in a tightening cycle other central banks are engaged in as well. read more  The RBA is the first major central bank to recognize that now is the time to slow down after aggressively raising rates this year, said Anthony Saglimbene, chief market strategist at Ameriprise Financial in Troy, Michigan.

"There's hope that the Federal Reserve at some point in the fourth quarter will say the same thing. Not stop raising interest rates, but just slow the pace," he said. "That's what the market's kind of rallying on below the surface."  Still, Fed Governor Philip Jefferson said inflation is the most serious problem facing the U.S. central bank and it "may take some time" to address. San Francisco Fed President Mary Daly said the central bank needs to deliver more rate hikes. read more read more

Rate-sensitive tech stocks rose as yields on the benchmark 10-year Treasury fell for a second day in a row after the jobs data and RBA's surprise move. Valuations on tech and other growth stocks fall when their cost of capital rises.  It was the biggest one-day gain for the S&P 500 since May 2020. The Dow Jones Industrial Average (.DJI) and S&P 500 (.SPX) posted their biggest two-day rallies since April 2020.

The repercussions of higher rates will likely be reflected in corporate results when earnings season begins in two weeks, said Dennis Dick, founder and market structure analyst at Triple D Trading Inc.  "We're still in for a tougher time here. I do think this earnings season is going to not be good," he said. "If one of the big guns warns that could end the rally rather quickly. This is just a relief rally as opposed to the start of a new bull market."

Billionaire Elon Musk proposed going ahead with his original offer of $54.20 to take Twitter Inc (TWTR.N) private, two sources familiar with the matter said on Tuesday, sending the social media firm's shares surging 22.24%. Twitter was the largest percentage gainer on the S&P 500.  Tesla shares had been up about 6% before the news and immediately pared gains, ending up 2.90% on the day. read more  The megacap titans led the rally, with Amazon.com Inc (AMZN.O) climbing 4.50% and Microsoft Corp (MSFT.O) advancing 3.38%. Apple Inc (AAPL.O) rose 2.56% while Google parent Alphabet Inc (GOOGL.O) added 3.04%.  Banks such as Citigroup , Morgan Stanley and Goldman Sachs climbed more than 3%.  The rally was broad based, with just six stocks in the S&P 500 index closing lower.

The Dow Jones Industrial Average (.DJI) rose 825.43 points, or 2.8%, to 30,316.32, the S&P 500 (.SPX) gained 112.5 points, or 3.06%, at 3,790.93 and the Nasdaq Composite (.IXIC) added 360.97 points, or 3.34%, at 11,176.41.

Volume on U.S. exchanges was 12.51 billion shares, compared with the 11.63 billion average for a full session over the past 20 trading days

The rebound in stocks on Monday followed the S&P 500's (.SPX) lowest close in nearly two years last week that capped its worst monthly performance in September since March 2020.  Rivian Automotive Inc (RIVN.O) jumped 13.8% after the electric-vehicle maker said it produced 7,363 units in the third quarter, 67% more than the preceding quarter, and maintained its full-year target of 25,000. read more

Advancing issues outnumbered decliners on the NYSE by a 6.80-to-1 ratio; on Nasdaq, a 3.70-to-1 ratio favored advancers.  The S&P 500 posted two new 52-week highs and one new low; the Nasdaq Composite recorded 53 new highs and 73 new lows.