Stocks kicked off October with a bang, as a "bad news is good news" economic report sent Treasury yields retreating and prompted investors to take a bite of risk.
Specifically, the Institute for Supply Management's purchasing managers' index fell to 50.9 in September from the August reading of 52.8. This is the lowest level since May 2020.
"The U.S. manufacturing sector continues to expand, but at the lowest rate since the pandemic recovery began," says Timothy Fiore, chair of the ISM manufacturing business survey committee. "Following four straight months of panelists' companies reporting softening new orders rates, the September index reading reflects companies adjusting to potential future lower demand."
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Dan Wantrobski, technical strategist and associate director of research at Janney, explains more about why this sign of economic weakness sent stocks higher. "Global manufacturing data came in weaker than expected this morning, fueling investor optimism of a Fed 'pivot' in policy ahead [i.e., it will stop raising interest rates]," Wantrobski says. "The result so far is notable pullbacks in both the U.S. dollar index and Treasury yields and a broad-based rally in equities."
Indeed, the 10-year Treasury yield tumbled 15.3 basis points to 3.651% today (a basis point equals 0.01%). As for the stock market, the Dow Jones Industrial Average jumped 2.7% to 29,490, the S&P 500 Index gained 2.6% to 3,678, and the Nasdaq Composite rose 2.3% to 10,815.
Other news in the stock market today:
- The small-cap Russell 2000 jumped 2.7% to 1,708.
- Gold futures climbed 1.8% to finish at $1,702 an ounce.
- Bitcoin edged up 0.5% to $19,551.81. (Bitcoin trades 24 hours a day; prices reported here are as of 4 p.m.)
- Tesla (TSLA) slumped 8.6% after the company said it delivered 343,000 vehicles in the third quarter. This was an all-time high for the electric car maker, but fell short of the 371,000 deliveries analysts were expecting. "TSLA also held its AI Day late Friday, unveiling a prototype of its Optimus robot that it said would be available for purchase in 3-5 years and we think fell short of the typical hype leading up to Tesla investor events," says CFRA Research analyst Garrett Nelson (Strong Buy). Its capabilities appeared to be on par with existing robotics technologies – in other words, nothing groundbreaking. The good thing is we think investors are currently ascribing little value to future robot sales." While shares traded lower today, Nelson continues to view "TSLA as one of the market's most compelling earnings growth stories."
- Credit Suisse (CS) was down 5.6% at its intraday low after a report in the Financial Times sparked concerns over the financial strength of the Swiss bank. "CS has been in the news recently due to the uncertainty and speculation surrounding its strategic review, which is scheduled to be concluded by end of October," says CFRA Research analyst Firdaus Ibrahim (Sell). "The many options rumored to be considered by CS, including exit of U.S. investment banking, creation of a 'bad bank' to hold risky assets, and capital raise, indicate a huge overhaul is needed to turn around the bank, in our view. We believe that the negative sentiment surrounding the stock will not abate any time soon and believe its share price will continue to be under pressure. A convincing restructuring plan will help, but we remain skeptical, given its poor track record of delivering on past restructuring plans." CS stock finished the day up 2.2%.
Energy Stocks Rise Ahead of OPEC+ Meeting
The energy sector (+5.7%) was the best-performing sector today as U.S. crude futures climbed 5.2% to $83.63 per barrel. The rally comes ahead of Wednesday's meeting between the Organization of the Petroleum Exporting Countries and its allies, known as OPEC+.
"An in-person OPEC+ meeting means get your popcorn ready and prepare for some fireworks," says Edward Moya, senior market strategist at currency data provider OANDA. "Energy traders are pumping up crude prices ahead of the OPEC+ meeting as expectations are high that they will deliver the biggest reduction in output since the beginning of the pandemic. This will be the first in-person meeting since 2020, which means they will probably go big here and deliver a cut of more than 1 million barrels per day."
If that's the case, energy stocks could see more upside this week – and these are some of the top picks in the sector. Many have pulled back from recent highs, but each is still well-liked by the analyst crowd.
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