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Stock Market Wrap-Up: October 1, 2024 – A Robust End to the Third Quarter
As the third quarter drew to a close, the stock market ended on a high note, defying historical trends that often see September as a challenging month for equity markets. Here’s a detailed look at the key events and movements that shaped the market on October 1, 2024.
Benchmark Performance
The Dow Jones Industrial Average ($DJI) edged up by 0.04%, or 17.15 points, to close at 42,330.15. This modest gain was driven by 16 of the 30 components of the index ending in positive territory, while 14 closed in the red.
The tech-heavy Nasdaq Composite saw a more significant rise, advancing 69.58 points or 0.4% to 18,189.17. Intuitive Surgical, Inc. ($ISRG) was the standout performer, surging 2.5% and contributing significantly to the Nasdaq's gains. $ISRG currently holds a Zacks Rank #3 (Hold).
The S&P 500 also recorded a gain, rising 0.4% or 24.31 points to finish at 5,762.48. Eight sectors within the index closed positively, with the Real Estate Select Sector SPDR ($XLRE), Health Care Select Sector SPDR ($XLV), and Energy Select Sector SPDR ($XLE) leading the pack with increases of 0.9%, 0.7%, and 0.7%, respectively. Conversely, the Materials Select Sector SPDR ($XLB) faced a decline of 0.6%.
Economic Indicators and Fed Commentary
Federal Reserve Chair Jerome Powell played a crucial role in shaping market sentiment. During a conference in Nashville, Powell emphasized that any future interest rate cuts will be implemented gradually to maintain economic stability. He stated, "We're viewing this as a process that will unfold over time," and added that the pace of rate reductions will depend on incoming data.
This week is pivotal for economic data releases, with job openings data set to be published on Tuesday, followed by the ADP employment report on Wednesday, and initial jobless claims on Thursday. Analysts predict that approximately 145,000 new jobs were added in September, with the unemployment rate expected to remain steady at 4.2%. These reports are critical for understanding the current job market dynamics and will likely influence the Federal Reserve's interest rate decisions.
Market Volatility and Trading Volume
The CBOE Volatility Index ($VIX), often referred to as the fear gauge, fell by 1.4% to 16.73. This decrease indicates a reduction in market volatility, reflecting increased investor confidence. Trading volume on Monday was robust, with 12.64 billion shares traded, surpassing the average of 11.93 billion over the past 20 sessions. The S&P 500 marked 30 new 52-week highs and two new lows, while the Nasdaq Composite noted 82 new highs and 88 new lows.
Sector Performance and Notable Stocks
The consumer discretionary sector, particularly the Consumer Discretionary Select Sector SPDR ($XLY), has seen a remarkable surge and may be due for a period of stabilization. Technical indicators such as the Directional Movement Index (DMI) and Relative Strength Index (RSI) suggest potential signs of a mean reversion in this sector. For instance, if the RSI surpasses the 70 threshold, it may indicate that the stock or ETF is overbought and could be due for a pullback.
In other sector news, CVS Health ($CVS) shares rose 2% in premarket trading as the company reportedly considers strategic options, including a possible breakup of its retail and insurance units. This move comes as CVS faces pressure from activist investors.
Apple ($AAPL) shares approached their all-time high after closing up 2.3% on Monday. JPMorgan analysts attributed the strong performance to better supply mix and delayed consumer uptake of the higher-end iPhone models.
Labor Market and Dock Workers' Strike
A significant development that could impact the economy is the strike by U.S. dock workers at 14 ports from Maine to Texas. This strike, which began after the midnight expiration of their contract with the United States Maritime Alliance, could disrupt supply chains and accelerate inflation. Shares of package delivery giants UPS ($UPS) and FedEx ($FDX) are expected to benefit from increased air freight deliveries due to the strike.
Nike's Q1 Expectations
Nike ($NKE) is set to report its fiscal 2025 first-quarter results after the bell, with analysts expecting declining sales and profits. Revenue is projected to drop about 10% to $11.65 billion, and net income is expected to fall by nearly half to $774.65 million. Despite these expectations, Deutsche Bank analysts believe this quarter will mark the bottom for Nike's sales decline before a recovery.
Quarterly and Monthly Performance
The third quarter ended on a strong note for all three major indexes. The S&P 500 rose by 5.5%, the Nasdaq advanced by 2.6%, and the Dow experienced an 8.2% increase. For the month of September, the Dow climbed by 1.9%, the Nasdaq increased by 2.7%, and the S&P 500 grew by 2%, marking its first positive September since 2019.
Conclusion
As the stock market transitions into the fourth quarter, several key factors will continue to influence market sentiment. The gradual approach to interest rate cuts outlined by Jerome Powell, the upcoming labor market data, and the ongoing dock workers' strike are all critical elements to watch. Investors remain cautious yet optimistic, given the robust performance of the major indexes in the face of historical trends.
The mix of positive economic indicators, strong sector performances, and the potential for mean reversion in overbought sectors sets the stage for an intriguing fourth quarter. As always, staying informed and adapting to changing market conditions will be crucial for navigating the complexities of the stock market.
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