Stock Market News for Oct 5, 2022

Wall Street closed sharply higher on Tuesday for the second straight session. A significant drop in the U.S. 10-year treasury yield following a lower-than-expected interest rate hike by the Reserve Bank of Australia has made investors ponder whether the worst of the policy tightening in global markets was behind us. Weak job openings data also helped feed the belief. All three major stock indexes ended in positive zone.

How Did the Benchmarks Perform?

The Dow Jones Industrial Average (DJI) jumped 2.8% or 825.43 points to close at 30,316.32. Notably, all components of the 30-stock index ended in the green.

The tech-heavy Nasdaq Composite finished at 11,176.41, advancing 3.3% or 360.97 points, led by large-cap tech stocks.

The S&P 500 closed its biggest single-day rally in two years, having gained 3.1%, or 112.50 points to end at 3,790.93. All 11 broad sectors of the benchmark index closed in positive territory. The Energy Select Sector SPDR (XLE), the Financials Select Sector SPDR (XLF) and the Materials Select Sector SPDR (XLB) increased 4.3%, 3.7% and 3.7%, respectively. 

The fear-gauge CBOE Volatility Index (VIX) was down 3.4% to 29.07. A total of 12.5 billion shares were traded on Tuesday, higher than the last 20-session average of 11.6 billion. Advancers outnumbered decliners on the NYSE by a 6.80-to-1 ratio. On Nasdaq, a 3.70-to-1 ratio favored advancing issues.

Reserve Bank of Australia Slows Down Rate Hike

In a surprise move, the Reserve Bank of Australia hiked interest rates by a lower-than-expected 25 bps, becoming the first global central bank to slow down its pace of policy tightening, albeit stressing on the fact that further tightening would be needed. Investors took to this as a positive sign that would encourage other apex banks to review their stringent rate hikes planned and to provide relief going forward.

JOLTS Report Shows Weakening Job Openings

The JOLTS report for August surfaced, showing that the number of job openings plunged by more than a million, implying that the massive U.S. labor gap is shortening.

According to the Bureau of Labor Statistics, available positions came in at 10.1 million for August, declining 10% from the July figure of 11.2 million. This was against the consensus and is the biggest recorded monthly drop since April 2020. With the labor market showing signs of a slowdown, investors hope that the Fed would take cognizance of the fact before they meet next to decide on rate hikes.

Growth Stocks Prosper as 10-year Treasury Yield Falls

Yields on the benchmark U.S. 10-year Treasury note fell on Tuesday for the second straight session, in expectation of a departure from the Fed from its hawkish stance on interest rate hikes. The yield dropped 20 basis points during the session to 3.61%. A week back, it was at 4.01%, having topped the 4% mark for the first time since 2008.

Soft economic data reported early in the week showing a slowdown in job openings and manufacturing activity has led to widespread speculation that the Fed might pivot in its aggressive stance of rate hikes, leading to yields dropping.

Yields move in inverse relation to stock prices. Lower bond yields have a positive effect on large-cap growth stocks like technology because they push up the relative value of earnings from these stocks in the future. Consequently, shares of mega-cap growth stocks Amazon.com, Inc. AMZN and Microsoft Corporation MSFT gained 4.5% and 3.4%, respectively. Both stocks carry a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

Economic Data

According to the U.S. Census Bureau, factory orders in August, down two consecutive months, decreased less than $0.1 billion or remained virtually unchanged at $548.4 billion. This follows a 0.1% decrease in July.


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