Stocks Rebounded Last Week as Investors Put Rate Fears Behind Them

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Stocks clawed higher last week as investors stopped worrying about high interest rates.

The S&P 500 rose 0.5 percent between Friday, September 29, and Friday, October 6. At one point the index was down 1.7 percent, but it rallied sharply on Friday after September’s employment report.

The news initially looked bearish because strong job growth spurred interest-rate fears. But wages rose less than forecast and unemployment didn’t fall as expected. The Institute for Supply Management’s manufacturing index also noted a sharp drop in prices earlier in the week. Another report from Reuters noted that shipping costs with United Parcel Service (UPS) and FedEx (FDX) are dropping for the first time in more than four years.

Biggest Gainers in the S&P 500 Last Week
MarketAxess (MKTX)+12%
Edward Lifesciences (EW)+6.4%
CME (CME)+5.8%
Arista Networks (ANET)+5.5%
EQT (EQT)+5.4%
Source: TradeStation Data

Together, those headlines may suggest inflationary pressures continue to ease. Traders will get more information on Thursday morning with the important Consumer Price Index (CPI) for last month. Attention will then focus on quarterly earnings.

Tech Leads the Rebound

Technology was the top-performing sector last week as investors flocked back to semiconductors like Nvidia (NVDA) and software makers like Palo Alto Networks (PANW). Communications and health care also gained.

Energy stocks fell the most as traders took profits in the third-quarter’s leading sector.

Utilities and consumer staples fell sharply, plagued by higher interest rates.

Last week featured some important news for individual companies. Tesla’s (TSLA) quarterly deliveries missed estimates because of factory downtime, but the EV-maker rebounded after issuing strong guidance. Pioneer Natural Resources (PXD) could also be acquired by Exxon Mobil (XOM) for about $60 billion, according to The Wall Street Journal. On Friday, the United Auto Workers (UAW) opted not to expand its strike against General Motors (GM) after the company made concessions on the union’s reach.

S&P 500, daily chart, with select indicators and patterns.

Charting the Market

Friday was potentially a key session because the S&P 500 dipped under Thursday’s low before rallying to end the week higher. The result was a “bullish outside day,” which may signal a period of weakness is ending.

Wilder’s Relative Strength Index (RSI) also fell to an oversold condition for the first time in a year before rebounding.

Third, last week’s bounce came after the index retraced 50 percent of its move in 2023. That may suggest the larger bullish move remains in effect.

The rebound additionally occurred near the 200-day moving average, which may confirm its longer-term uptrend.

The Week Ahead

This week has some important economic news. It also marks the beginning of earnings season.

The bond market is closed today for Columbus Day / Indigenous People’s Day, which delays the release of energy data later in the week.

Biggest Decliners in the S&P 500 Last Week
AES (AES)-18%
McCormick (MKC)-15%
NextEra Energy (NEE)-12%
Hasbro (HAS)-11%
DexCom (DXCM)-11%
Source: TradeStation Data

PepsiCo (PEP) issues quarterly results tomorrow morning.

The producer price index (PPI) inflation report is on Wednesday, with minutes from the last Federal Reserve meeting in the afternoon.

The big CPI inflation numbers are on Thursday morning, along with initial jobless claims and crude-oil inventories. Delta Airlines (DAL) and Walgreen Boots Alliance (WBA) report earnings.

Friday brings results from major banks like JPMorgan Chase (JPM), Wells Fargo (WFC) and Citi (C). Consumer sentiment is also due.

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