S&P 500 and Nasdaq Rally 1% After a Week of Volatile Trading

Barry Adams
30 Oct, 2023
New York City

Stocks on Wall Street advanced, and investors searched for bargains after two popular indexes dipped into correction territory amid ongoing interest rate uncertainties.

Wall Street indexes extended gains for the day, and investors looked ahead to another batch of quarterly earnings and rate decisions from the Federal Reserve, the Bank of England, and the Bank of Japan.

Market indexes rebounded after volatile trading in the previous week on ongoing rate anxieties and worries about the rise of long-term interest rates and their negative impact on the U.S. economy.

Investors are hoping that the Federal Reserve will leave the fed funds rates unchanged at the end of its two-day meeting on November 1 and provide insights into the economy.

Investors are also looking forward to reviewing the Fed's estimate of economic growth in 2023, inflation outlook, and jobless rate estimate.

Many investors are hoping that the Fed will hold rates after the December meeting as well, paving the way for investors to focus on corporate earnings and other economic metrics.

Interest rate uncertainties rose after the third quarter. GDP growth accelerated to 4.9%, powered by strong growth in consumer spending.

Consumer spending has been resilient despite multiple rate hikes over the last eighteen months because wages adjusted for inflation are still rising and strong labor market conditions are also bolstering consumer confidence.

Last week, the S&P 500 index fell to correction territory and the Nasdaq Composite sank deeper into correction, largely because of rate uncertainties.

On the earnings front, companies are reporting a sustained rise in sales, driven in part by price hikes passed on to consumers.

Amazon, Microsoft, Meta Platforms, and Intel advanced after earnings met or exceeded investors' expectations, but Google-parent Alphabet plunged after the company reported slower-than-expected growth in its cloud unit.

Investors are looking ahead to quarterly results from Apple on Thursday after the close of regular trading sessions, and the stock has declined 15% from its 52-week high.

 

U.S. indexes and Yields

The S&P 500 index increased 0.7% to 4,148.90, and the Nasdaq Composite advanced 0.6% to 12,722.30.

The yield on 2-year Treasury notes decreased to 5.06%, 10-year Treasury notes inched lower to 4.90%, and 30-year Treasury bonds edged down to 5.06%.

Crude oil decreased $2.85 to $82.71 a barrel, and natural gas prices fell 14 cents to $3.34 a thermal unit.

Gold declined 0.4% to $1,997.20 an ounce following the slight weakness in the 10-year Treasury yields. 

The dollar index edged higher to 106.28, the level last seen in November 2022, as the prospect of a widening war in the Middle East rose amid negative comments over the last five days from leaders in Lebanon, Egypt, Iran, Syria, the UAE, Saudi Arabia, and Qatar.

 

U.S. Stock Movers

McDonald's Corp. gained 2.2% to $261.24 after the fast-food company reported third-quarter earnings ahead of market expectations.

Revenue in the quarter increased 4% to $5.9 billion from $5.7 billion, net income soared 63% to $1.8 billion from $1.1 billion, and diluted earnings per share jumped to $2.45 from $1.68 a year ago.

The fast food chain reported strong business metrics in the quarter.

Global comparable sales in the quarter increased 12.6%, reflecting strong comparable sales of 12.6% in each market segment; systemwide sales increased 9%; and consolidated operating income rose 10% from a year ago.

U.S. comparable sales jumped to 12.6% from 3.5% in the period a year ago after the company passed on higher prices to customers.

 

European Markets Rebounded

European markets advanced after a volatile week of downward trading, and investors awaited economic data releases and another batch of corporate earnings this week.

European market indexes rebounded after investors shifted their focus to quarterly results and awaited rate decisions from the Bank of England, the U.S. Federal Reserve, and the Bank of Japan.

Investors remained focused on the latest earnings results and overlooked growing worries about a wider war in the Middle East and a slower-than-expected economic rebound in China.

The DAX index jumped more than 0.5% after the German economy contracted less than expected in the third quarter.

 

German Economy Contacted In Third Quarter

The German economy contracted by 0.1% in the third quarter, following the upwardly revised 0.1% in the second quarter, the Federal Statistics Office, or Destatis, reported Monday.

Consumer spending fell sharply as consumers battled elevated inflation and rising interest rates, but investment in equipment rose, limiting the contraction in the economy.

The seasonally adjusted GDP shrank by 0.3% from a year ago in the third quarter, after remaining unchanged in the second quarter.

The largest economy in the Euro Area has been struggling under the weight of high energy prices and rising interest rates, and the economy has stagnated for three quarters in a row.

 

Swedish Economic Growth Stalled 

In other economic news, the Swedish economy stalled in the third quarter, following a 0.8% contraction in the second quarter, Statistics Sweden reported Monday.

According to the preliminary estimate, the Swedish economy shrank 1.2% from a year ago.

 

UK Mortgage Approvals Declined In September

Net mortgage approvals in September declined to 43,328 from the revised 45,447 in August, the Bank of England reported Monday.

The mortgage approvals act as an indicator for future borrowing, and the approvals dropped to the lowest level since January.

The UK's' housing market activities have been depressed after home prices surged in the last three years and mortgage rates rose following the aggressive rate hikes by the Bank of England.

 

Europe Indexes and Yields

The DAX index increased 0.2% to 14,716.54, the CAC-40 index advanced 0.4% to 6,825.09, and the FTSE 100 index edged higher by 0.5% to 7,327.39.

The yield on 10-yetrar German bonds decreased to 2.80%, French bonds traded lower to 3.42%, the UK gilts edged up to 4.55%, and Italian bonds inched higher to 4.73%.

The euro hovered near a three-month low at $1.058, the British pound at $1.212, and the U.S. dollar at 90.28 Swiss cents.

Brent crude decreased $2.58 to $87.98 a barrel, and the Dutch TTF natural gas edged lower by €0.90 to €49.63 per MWh.

 

Europe Stock Movers

Clariant AG rose 3.3% to CHF 12.79 after the company said it plans to acquire Lucas Meyer Cosmetics from International Flavors and Fragrances for $810 million.

Ascential jumped 27% to 273.60 pence after the UK-based information and analytics firm said it plans to sell its digital commerce and consumer research unit for an enterprise value of £1.4 billion.

Glencore Plc rose 1.1% to 450 pence despite the mining company lowering its 2023 nickel production estimate.

Frasers Group edged up 1.1% to 805 pence after the company announced the sale of the Missguided brand and intellectual property rights associated with the brand.

ArcelorMittal SA decreased 4.6% to €20.09 after a fire killed 32 people at a mine in Kazakhstan controlled by the company.

Reckitt Benckiser Group Plc advanced 1.6% to 5,540 pence, and the consumer products maker launched the first tranche of its stock repurchase program.