Wall Street ends down as two-day rally fizzles on data, Fed message

The Dow down almost 450 points by 11 a.m. before beginning an upswing that continued through the rest of the session to close very modestly 42 down.  So what’s going on? Well yesterday’s surge was triggered by excitement that new job opening had grown more slowly, in fact the smallest increase in 2-1/2 years.  Today, investors decided that despite the small increase, the labor market remains too strong to assure that the Fed will ease up at all.  But with the huge sell off that occurred early this morning, the market decided that the indexes had hit bottom and so started some furious bargain hunting.

 The P/E is now down to close to the historic mean which means “a favorable indicator that this rally could have legs, there’s still more to go.”  But the bad news is that OPEC has decided to cut production deeply which, though good for the energy sector, it’s bad for the consumer as still higher gas prices are certainly now in our future.  Volume was below average at 10.4 billion. 

Wed  October 5, 2022  6:20 PM

Wall Street ends down as two-day rally fizzles on data, Fed message

By Herbert Lash, Ankika Biswas and Bansari Mayur Kamdar

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

DJ: 30,273.87  -42.45           NAS: 11,148.64  -27.77          S&P: 3,783.28  -7.65        10/5

Oct 5 (Reuters) - Wall Street stocks closed lower on Wednesday, unable to sustain a late-day surge, after data showing strong U.S. labor demand again suggested the Federal Reserve will keep interest rates higher for longer.  Fed officials have insisted on aggressive rate tightening to battle inflation, a message the market has feared would lead to a hard landing and likely recession.  However, investors also sought bargains in a market that appears oversold. The forward price-to-earnings ratio is at 15.9, close to its historic mean, down from around 22 before the market's big slide this year.

"By battling back, to me that is a favorable indicator that this rally could have legs," said Sam Stovall, chief investment strategist at CFRA Research in New York.  "It too confirms that investors believe, traders believe, that there's still more to go in this rally," he said. 

U.S. private employers stepped up hiring in September, the ADP National Employment report on Wednesday showed, suggesting rising rates and tighter financial conditions have yet to curb labor demand as the Fed battles high inflation. read more  The Institute for Supply Management's services industry employment gauge shot up in another sign labor remains strong as the overall industry slowed modestly in September. read more

The Fed is expected to deliver a fourth straight 75-basis-point rate hike when policymakers meet Nov. 1-2, the pricing of fed fund futures shows, according to CME's FedWatch tool.  San Francisco Fed President Mary Daly told Bloomberg TV in an interview that inflation is problematic and that the U.S. central bank would stay the course. read more  "The path is clear: we are going to raise rates to restrictive territory, then hold them there for a while," she said. "We are committed to bringing inflation down, staying course until we are well and truly done."

The benchmark S&P 500 (.SPX) index rose 5.7% Monday and Tuesday as Treasury yields slid sharply on softer U.S. economic data, the UK's turnaround on proposed tax cuts that had roiled markets and Australia's smaller-than-expected rate hike.  Treasury yields shot up again on Wednesday after the softer economic data failed to bolster budding hopes the Fed might pivot to a less hawkish policy stance.

Eight of the 11 major S&P 500 sectors fell, led by a 2.25% decline in utilities (.SPLRCU) and 1.9% drop in real estate (.SPLRCR).  The energy sector led the market higher, up 2.06%, after the Organization of the Petroleum Exporting Countries and allies agreed to cut oil production the deepest since the COVID-19 pandemic began, curbing supply in an already tight market. read more

The Dow Jones Industrial Average (.DJI) fell 42.45 points, or 0.14%, to 30,273.87, the S&P 500 (.SPX) lost 7.65 points, or 0.20%, to 3,783.28 and the Nasdaq Composite (.IXIC) dropped 27.77 points, or 0.25%, to 11,148.64.

Volume on U.S. exchanges was 10.43 billion shares, compared with the 11.64 billion average for the full session over the past 20 trading days.

Twitter Inc (TWTR.N) lost momentum in line with its peers, a day after surging 22% on billionaire Elon Musk's decision to proceed with his original $44-billion bid to take the social media company private. read more  Twitter fell 1.35% and Tesla Inc (TSLA.O), the electric-car maker headed by Musk, also slid 3.46.

Declining issues outnumbered advancers on the NYSE by a 2.08-to-1 ratio; on Nasdaq, a 1.69-to-1 ratio favored decliners.  The S&P 500 posted two new 52-week highs and nine new lows; the Nasdaq Composite recorded 49 new highs and 128 new lows.