Hopes of Interest Rates Stability Fuel 5% Weekly Rally In Stocks

Barry Adams
03 Nov, 2023
New York City

Market indexes rallied more than 1% for the third day in a row in the hopes that interest rates have peaked for now.

The yield on 10-year Treasury notes edged lower for the third day in a row as investors hoped that the Federal Reserve may pause rate hikes at the next meeting in December.

Investors warmed up to stocks on the expectation of stable interest rates for the next three months, resilient consumer spending, and a softening but still tight labor market.

The S&P 500 index and the Nasdaq Composite index advanced 1% in active trading after the latest jobs report, which also supported the peak-rate theory.

 

Nonfarm Payroll Growth Slowed in October

Nonfarm payrolls in October increased 150,000, compared to 297,000 in the previous month, the U.S. Bureau of Labor Statistics reported Friday.

The jobless rate at 3.9% and the number of unemployed persons at 6.5 million changed little in October.

In October, the number of long-term unemployed, those jobless for 27 weeks or more, was little changed at 1.3 million and accounted for 19.8% of all unemployed persons.

Employers added jobs in healthcare (58,000), social assistance (19,000), and government (51,000), and several strikes, including by the members of the UAW, pulled down employment in manufacturing by 35,000.

October payrolls increased below the average monthly gain of 258,000 over the last 12 months, but higher than the 75,000 jobs needed to meet the needs of the expanding population.

 

U.S. indexes and Yields

The S&P 500 index and the Nasdaq Composite are set to gain about 5% in the week after bond yields edged lower and rate uncertainties eased.

The S&P 500 index increased 1.0% to 4,287.45, and the Nasdaq Composite advanced 1.2% to 13,218.45.

The yield on 2-year Treasury notes decreased to 4.86%, 10-year Treasury notes inched lower to 4.50%, and 30-year Treasury bonds edged down to 4.69%.

Crude oil decreased $1.06 to $81.39 a barrel, and natural gas prices rose 3 cents to $3.50 a thermal unit.

Gold increased $6.61 to $1,992.53 an ounce after bond yields edged lower and the dollar weakened.

The dollar index, which weighs the U.S. dollar against a basket of foreign currencies, edged lower to 105.25.

 

U.S. Stock Movers

Apple Inc. declined 1.7% to $174.51 after the maker of popular communication devices reported a decline in revenue for the fourth quarter in a row and forecasted weaker sales in the current quarter.

Revenue in the fiscal fourth quarter declined 1% to $89.5 billion from $90.1 billion, net income advanced to $22.9 billion from $20 billion, and diluted earnings per share rose to $1.46 from $1.29 a year ago.

Sales of iPhones increased to $43.8 billion from $43.6 billion, Macs plunged 34% to $7.6 billion from $11.5 billion, iPads eased to $6.4 billion from $7.2 billion, wearables fell to $9.3 billion from $9.7 billion, and services revenue jumped 16% to a record high of $22.3 billion from $19.2 billion a year ago.

Sales in the Americas edged up to $40.1 billion from $39.8 billion and edged slightly lower in Europe to $22.5 billion, in Greater China to $15 billion, in Japan to $5.5 billion, and in the rest of Asia to $6.3 billion.

For the full year, sales declined 3% to $383.3 billion from $394.3 billion.

The company's board of directors declared a cash dividend of 24 cents per share payable on November 13 to shareholders on record on November 10.

The company's installed base of devices reached a new record high across all products and all geographic segments, said chief financial officer Luca Maestri.

The company guided current quartet sales "to be similar to" the previous year, but the current year has one fewer week.