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Market Snapshot: Dow rallies 300 points, reclaims 35,000 as retail-sales report surpasses expectations

U.S. stock benchmarks traded higher Friday, with the Dow back above the 35,000 level as quarterly results from Goldman Sachs and better-than-expected U.S. September retail sales, helped fuel early buying on Wall Street.

How are stock-index futures trading?
  • The Dow Jones Industrial Average
    DJIA,
    +0.85%

    rose 296 points, or 0.8%, to around 35,205.
  • The S&P 500 index
    SPX,
    +0.66%

    gained 28 points, or 0.6%, at around 4,466, handily above its 50-day moving average at 4,436.74 for the first time after slipping below that level near the end of September.
  • The Nasdaq Composite Index
    COMP,
    +0.51%

    advanced 62 points, or 0.4%, at 14,884.

On Thursday, the Dow rose 535 points, or 1.56%, to 34913, the biggest one-day point and percentage gain since July 20. The S&P 500 increased 74 points, or 1.71%, to 4438, its best day since early March, while the Nasdaq Composite gained 252 points, or 1.73%, to 14823, its best day since May.

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What’s driving the market?

U.S. stocks maintained a bullish stance Friday after a report on September retail sales indicated that Americans are spending enough money to sustain an economic recovery from the pandemic, even if consumers are paying more to do so.  

Retail sales climbed 0.7% last month, the government said Friday. Economists polled by The Wall Street Journal had forecast a 0.2% decline. Sales rose in most major categories including, auto dealers, with the September retail report showing a 0.5% increase.

“Retail sales came in above consensus, rising 0.7% in the less volatile, ex-auto and gas segment,” wrote Chris Zaccarelli, chief investment officer, at Independent Advisor Alliance, in emailed comments.

“This illustrates the strength of the American consumer, and we believe robust spending and borrowing will still continue in the future and that the pandemic did nothing to change Americans’ willingness to spend money,” the CIO said. 

The rise in spending, however, came as consumer sentiment in October slipped. A reading of consumer sentiment from the University of Michigan fell to 71.4 in October from 72.8 in the previous month.

“Consumer sentiment dropped again, and the survey pointed to many worries on consumers’ minds that will ‘continue to dim the pace of consumer spending into 2022,” wrote Robert Frick, corporate economist with Navy Federal Credit Union, in a daily note.

However, he said that the jump in consumer spending and increase in savings were mitigating factors to the dour outlook held by average Americans.

“The concerns are real, but so is the excess $1 trillion saved from stimulus and lack of spending during the shutdown, and so is the pent-up demand to spend across the board as the economy reopens,” Frick wrote.

Stock indexes have been trending up as Wall Street cheers a batch of third-quarter earnings reports that are beating expectations, including those from banks Morgan Stanley
MS,
+1.66%
,
Bank of America
BAC,
+2.03%
,
Citigroup
C,
+2.48%

and Wells Fargo
WFC,
+5.57%
.

On Friday, Goldman Sachs Group on Friday
GS,
+2.57%

reported third-quarter net income of $5.28 billion, or $14.93 a share, compared with $3.23 billion, or $8.98 a share, in the year-ago period. Goldman’s stock was up 2% and the Dow component’s rally was helping buoy the price-weighted index.

Banks are viewed as bellwethers of economic health so their outperformance and outlooks from executives can embolden optimistic investors.

Next week will see a number of big names reporting across several sectors, including Johnson & Johnson
JNJ,
+0.82%
,
Netflix.
NFLX,
+0.17%
,
Tesla.
TSLA,
+2.03%
,
Intel
INTC,
+0.54%

and Chipotle Mexican Grill
CMG,
+0.30%
.

Apart from earnings that helped assure investors that the economy continues to grow despite rising inflation, stocks surged on Thursday following a drop in first-time jobless claims to a pandemic low and producer prices that rose by less than expected.

“Up until yesterday, we were reluctant to turn our eyes to the upside, and we said that there was a chance for another setback in equities. In our view, with no significant change in the fundamental background, that chance is still on the table,” said Charalambos Pissouros, head of research at JFD Group, in a note to clients.

“However, with the technical pictures of several equity indexes pointing to breaks above significant downside resistance lines, we will now aim higher for a while, as investors may have already accepted that the Fed will taper in November, and perhaps raise interest rates even next year,” said the analyst, adding investors should be wary of “trusting a long-lasting recovery,” and be ready to re-evaluate if needed.

There was some grist for bearish investors though.

The New York Empire State Manufacturing Index fell 15 points to 19.8 in October from 34.3 in September and a report on U.S. import prices increased 0.4% in September.

Which companies are in focus?
  • Shares of Alcoa Corp.
    AA,
    +13.17%

    climbed 10% on Friday after the aluminum producer reported stronger-than-expected results, said it would pay its first dividend since 2016 and announced a $500 million share buyback.
  • Virgin Galactic Inc.
    SPCE,
    -14.13%

    shares slid 12% after delaying its next test flight and the start of its space-tourism business.
  • Shares of Charles Schwab Corp. SCHW climbed 0.6% toward another record Friday, after the discount broker reported third-quarter profit and revenue that rose above expectations, as continued bullish investor sentiment helped produce a fivefold increase in trading revenue. 
  • Shares of Prologis Inc. PLD rose 2% toward a fifth straight gain Friday, after the real-estate investment trust focused leasing logistics facilities reported third-quarter earnings that rose above expectations, and boosted its full-year outlook, amid record increases in market rents and valuations. 
How are other assets trading?
  • The 10-year Treasury yield
    TMUBMUSD10Y,
    1.568%

    rose 4 basis points to 1.56%. Yields and debt prices move in opposite directions.
  • Oil futures rose, with the U.S. benchmark
    CL00,
    +1.11%

    up 1.3% at $82.33 a barrel. Gold futures
    GC00,
    -1.27%

    fell 1.7% to $1,767.60 an ounce. Brent-oil futures BRN00 briefly hit $85 a barrel, the highest level since October 2018.
  • The Stoxx Europe 600
    SXXP,
    +0.71%

    rose 0.3%, while London’s FTSE 100
    UKX,
    +0.25%

    rose 0.1%.
  • The Shanghai Composite
    SHCOMP,
    +0.40%

    rose 0.3%, while Japan’s Nikkei 225
    NIK,
    +1.81%

    advanced 1.8%

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