Market Perspective for October 9, 2022

Finally, we had a week with all the major market indexes finishing in the green. Monday and Tuesday, the markets had an impressive rally. Many traders said that the buying occurred because the stocks were looking oversold after a terrible September. Also adding to the rally was the rebalancing of portfolios at the end of the quarter.

During the two-day rally, the Dow Jones Industrial Average rallied more than 1,500 points, and the S&P 500 had its best two-day rally since 2020.

On Monday, the Dow Jones Industrial Average gained about 765 points, the S&P 500 climbed 2.6 percent, and the Nasdaq Composite advanced 2.3 percent. On Tuesday, The Dow Jones Industrial gained another 825 points, or 2.8 percent getting above 30,000 again, closing at 30,316.32. The S&P 500 gained another 3.1 percent, and the Nasdaq Composite added another 3.3 percent.

For the week, the Dow Jones Industrial Average was up 2.0 percent, the S&P 500 gained 1.5 percent, and the Nasdaq Composite added 0.7 percent. For the year, the Dow is down 19.4 percent, the S&P 500 is down 23.6 percent, and the Nasdaq has lost 31.9 percent.

On Tuesday, Twitter jumped 22 percent after Elon Musk decided he would agree to purchase Twitter for a price of $54.20 per share.

Helping the markets rally was the job openings data, which is pointing to a weakening in the labor market that the Federal Reserve has been looking for. A weakening labor market could signal the Fed will start easing its aggressive tightening.

The data showed that job openings dropped 10 percent in August and the fourth decline in the past five months. The gap between open jobs and the number of unemployed is still high by historical standards. It is starting to narrow, and companies have been slowing down the rate at which they hire before they cut jobs, which is why unemployment continues to be low.

But on Friday, the Jobs report came in hotter than most wanted to see. The job report proved that the labor market remains strong and resilient. It also showed that the Fed has more work ahead of them to slow down inflation and get closer to the 2 percent inflation rate.

The job report showed a gain of 263,000 in nonfarm payrolls, which was below expectations. The rate was the slowest monthly gain in a year and a half. The low unemployment rate is one of the critical reasons for inflation next to housing and renting costs.

Average hourly earnings increased 5 percent on a year-over-year basis, down from the 5.2 percent pace in August. Hourly earnings rose 0.3 percent on a monthly basis, the same as it was in August.

On Tuesday, a number that the Federal Reserve carefully watches, the Job Openings and Labor Turnover (JOLT) number came out showing that job openings dropped by 1.1 million from openings in August. Open job positions were 10.05 million for August, down from the 11.17 million open positions in July, according to the Bureau of Labor Statistics.

The drop is below the estimate of 11.1 million open positions, and the largest one-month drop since April 2020, at the start of the Covid pandemic. The ratio showed two job openings for every available worker in the United States. The ratio is now down to 1.67 to 1. These figures show that the tight labor market is beginning to loosen up.

As of Friday, futures pricing is now pointing to an 82 percent chance of a 0.75-point rate increase in November, a 0.5-point increase in December, and followed by a 0.25-point rise in February.

These rate increases would take the fed funds rate to a range of 4.5 to 4.75 percent. This rate is believed to be the point where the Federal Reserve stops increasing rates. Federal Reserve Chairman Jerome Powell said his decisions will be data-driven, and the next consumer price index report will have a lot to do with these decisions.

Upcoming releases for the week of October 10-14 include:

  • Wednesday: Producing Price Index (PPI)
  • Thursday: Consumer Price Index (CPI)
  • Thursday: Weekly unemployment claims
  • Friday: Retail sales
  • Friday: University of Michigan Index of Consumer Sentiment

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