4.11pm: US markets soar once again
US markets enjoyed a second consecutive day of strong gains as weaker than expected US job postings gave investors hope that the Federal Reserve may take its foot of the accelerator with regard to the pace of future interest rate increases.
At the close the Dow Jones Industrial Average had stormed 825 points higher, or 2.8%, to 30,316, the S&P 500 had advanced 113 points, or 3.06%, to 3,791 and the Nasdaq Composite soared 361 points, or 3.34%, to 11,176.
Bond investors are now starting to price in the possibility that the Fed will pull back on its rate hiking spree.
The benchmark 10-year US Treasury yield, which briefly spiked to 4% and hit its highest level since 2008 last week, has since tumbled and is now back around 3.6%.
While labor demand remains fairly strong, US job openings fell by the most in nearly 2-1/2 years, the first real sign that the Fed’s actions have had an impact on the jobs market.
But analysts were cautious as to whether the rally could be sustained.
“It almost feels like a panic rally. The market mood got way too sour and people started to jump in,” said Callie Cox, US investment analyst with eToro.
“But this rally feels random. It’s great to see stocks go up but these moves are a little disorienting. I’m being cautious.”
Shares in Twitter Inc. jumped nearly 13% on reports that Elon Musk is once again offering to buy the social media site for $44 billion, or $54.20 a share.
12.05pm: Dow pops over 700 points
The major US indices were gaining ground midday following figures showing American job openings declined more than expected in August, leading some investors to bet the Fed could back off its aggressive tightening campaign sooner than expected.
At midday, the Dow Jones Industrial Average had hit a day high of 30,290 points and remained up by 768 points or 2.6% at 30,247, while the S&P 500 was up by 2.9% at 3,783, and the Nasdaq Composite was up by 3.3% at 11,171.
The US Bureau of Labor Statistics reported in its Job Openings and Labor Turnover Summary (JOLTS) today, showing job openings fell to 10.1 million in August, down by more than one million from the 11.2 million openings in July.
Joshua Mahony, senior market analyst at online trading platform IG, said risk-on sentiment helped drive stocks higher, but the US dollar is continuing to come under pressure.
“With risk attitudes improving for the time being, we are seeing the dollar find itself on the back foot once again,” Mahony wrote in a report.
Mahony also wrote that the latest JOLTS figure showed the biggest collapse in US job openings on record, a possible sign where a cooling job market could put the brakes on continued high inflation by the world’s central banks.
“Nonetheless, we appear to be entering a period where bad news could be good news,” he wrote.
At midday, the major movers included cruise lines and casinos, as Norwegian, Royal Caribbean and Carnival saw increases of 13.4%, 12.6% and 12.5% respectively, along with Caesars Entertainment was up by 13%.
On the downside, the markets were relatively flat, with real estate investment trust Welltower down by 1.5%, Teleflex slid by 0.9% and Essex Property went lower by 0.8%.
9.35am: Sudden rally not expected to last
US stocks have been able to sustain yesterday’s much-welcomed rally with the three major indexes starting the day on Tuesday in positive territory.
Just after the market opened, the Dow Jones Industrial Average had added 450 points or 1.5% at 29,941 points, the S&P 500 was up 68 points or 1.9% at 3,747 points, and the Nasdaq Composite had gained 256 points or 2.4% at 11,073 points.
Forex.com market analyst Fawad Razaqzada said that this sudden rally stemmed from the hope that central banks would soon pivot toward a more dovish stance.
“Buoyed by hopes that softening US economic data is going to lead to a change in central bank policy, stocks have risen along with metals and bonds, with the dollar going in the opposite direction,” he said.
However, he added that he expected the stock market recovery to fade and the dollar to resume higher in the not-too-distant future.
“I fear much of the factors that had weighed on risk appetite are still there,” Razaqzada said. “The gains come on the back of a poor third quarter for risk assets… this weighed heavily on stocks, cryptos, metals, and bonds.”
6.30am: More gains
US stocks are expected to open higher on Tuesday, continuing their recovery from yesterday, as investors welcome the prospect of weaker economic data as a sign that the Federal Reserve will be persuaded to slow the pace of interest rate hikes.
Futures for the Dow Jones Industrial Average were up 1.3% in pre-market trading, while those for the S&P 500 rose 1.5% and contracts for the Nasdaq-100 were 1.9% higher.
“For now, we can all take a deep breath, and enjoy some positive vibes across the global financial markets. European indices gained yesterday, while the US indices rallied. Futures point at bullish start on both continents,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.
Some of the gains were driven by firmer oil prices, with some investors betting that oil cartel OPEC will cut output by around a million barrels per day to stabilize oil prices. There is also speculation that key producer Saudi Arabia may be willing to build some reserves to compensate for caps on Russian oil, said Ozkardeskaya.
Benchmark WTI crude oil futures were up 0.8% at $84.26 a barrel, while Brent crude futures were up 0.9% at $89.66 a barrel.
Meanwhile, the US ISM manufacturing index, released yesterday, showed that expansion in the world’s biggest economy slowed faster than investors expected.
“Interestingly, the soft ISM gave a positive spin to the market,” Ozkardeskaya added.
“I believe that this is an important sign that despite the Federal Reserve officials’ strongly hawkish rhetoric, many investors no longer believe that the Fed could continue tightening at the current speed. That’s a good ingredient for a global market rebound.”
Looking ahead, various indicators on the US jobs market will be in focus this week, culminating in the crucial non-farm payrolls numbers on Friday.
“Today, we will be watching the job openings data in the US, and hope to see a smaller number, as the Fed sees the job openings as a factor that could ease the pressure in the US jobs market,” said Ozkardeskaya.
The ADP report follows on Wednesday.
“Investors are praying for softish numbers this week to continue the rally,” noted Ozkardeskaya.
Still, fears that the world’s biggest economy will be stuck in a prolonged recession amid rising interest rates and spiraling inflation continue to worry investors and are likely to cap gains.
Contact the author at jon.hopkins@proactiveinvestors.com