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Market Snapshot: Stocks rally, Dow jumps 375 points as retail-sales report surpasses expectations

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

How are stock indexes trading?
  • The Dow Jones Industrial Average
    DJIA,
    +1.12%

    rose 375 points, or 1.1%, to around 35,287.
  • The S&P 500 index
    SPX,
    +0.75%

    climbed 34 points, or 0.8%, to around 4,472, 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,
    +0.46%

    advanced 70 points, or 0.5%, to 14,893.

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.

“That’s a big surprise,” said Jim Smigiel, chief investment officer at SEI, in a phone interview Friday. After the spread of the delta variant of the coronavirus led to a rise in COVID-19 cases, “people are ready to get back in the mix and they’re doing that voting with their dollars,” he said. 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,
+1.82%
,
Bank of America
BAC,
+3.10%
,
Citigroup
C,
+2.36%

and Wells Fargo
WFC,
+7.33%
.

On Friday, Goldman Sachs
GS,
+3.73%

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 up more than 3% Friday afternoon, with the Dow component’s rally helping to buoy the price-weighted index.

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

“The big macro theme is the reopening of the economy,” said Smigiel. “We’re seeing a reflection of increased activity.”

Next week will see a number of big names reporting across several sectors, including Johnson & Johnson
JNJ,
+0.66%
,
Netflix.
NFLX,
-0.66%
,
Tesla.
TSLA,
+2.32%
,
Intel
INTC,
+0.83%

and Chipotle Mexican Grill
CMG,
-0.39%
.

“There’s quite a long runway for the U.S. economy,” said Shawn Snyder, head of investment strategy at Citigroup’s U.S. consumer wealth management division, in a phone interview Friday. “It should continue to grow for the next couple of years.”

Which companies are in focus?
  • Shares of Alcoa Corp.
    AA,
    +15.01%

    soared 16% 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,
    -16.81%

    shares slid 16% after delaying its next test flight and the start of its space-tourism business.
  • Shares of Charles Schwab Corp. SCHW rose more than 3% 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 edged up 0.5% 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,
    1.576%

    rose about 5 basis points to 1.57%. Yields and debt prices move in opposite directions.
  • Oil futures rose, with the U.S. benchmark
    CL00,
    +1.12%

    up 0.7% at $81.90 a barrel. Gold futures
    GC00,
    -1.67%

    ended lower Friday, falling nearly 1.7% to settle at $1,768.30 an ounce. For the week, gold gained 0.6%.
  • The Stoxx Europe 600
    SXXP,
    +0.74%

    closed 0.7% higher for a weekly gain of 2.65%, while London’s FTSE 100
    UKX,
    +0.37%

    rose 0.4% Friday to advance 2% this week.
  • The Shanghai Composite
    SHCOMP,
    +0.40%

    closed 0.4% higher Friday, but fell 0.6% for the week. Japan’s Nikkei 225
    NIK,
    +1.81%

    advanced 1.8% Friday for a weekly gain of 3.6%.

—Barbara Kollmeyer contributed to this report.

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