U.S. Stocks Finish Volatile Trading Session Sharply Higher

After seeing substantial volatility early in the session, stocks moved sharply higher over the course of the trading day on Friday. With the rally, the major averages regained ground following the steep drop seen in the previous session.

The major averages pulled back off their highs going into the close but remained firmly positive. The Dow surged 482.54 points or 1.4 percent to 34,326.46, the Nasdaq advanced 118.12 points or 0.8 percent to 14,566.70 and the S&P 500 jumped 49.50 points or 1.2 percent to 4,357.04.

Despite the rebound on the day, the major averages posted significant losses for the week. The Dow slid by 1.4 percent, the S&P 500 slumped by 2.2 percent and the Nasdaq plunged by 3.2 percent.

The sharply higher close on Wall Street came as traders’ desire to go bargain hunting seemed to win out over concerns about inflation and the Federal Reserve scaling back its asset purchases.

The major averages showed wild swings in morning trading but eventually sustained a move to upside as traders picked up stocks at reduced levels following a disappointing September.

The Dow ended Thursday’s trading at its lowest closing level in three months, while the Nasdaq and the S&P 500 fell to two-month closing lows.

For the month of September, the Dow tumbled by 4.3 percent, and the Nasdaq and the S&P 500 plummeted by 5.3 percent and 4.8 percent, respectively. The S&P 500 saw its worst month since the early days of the coronavirus pandemic.

An extended pullback by treasury yields may also have generated buying interest on Wall Street, with the ten-year yield continuing to give back ground after reaching a three-month closing high on Wednesday.

On the U.S. economic front, a report from the Institute for Supply Management showed an unexpected acceleration in the pace of growth in U.S. manufacturing activity but noted persistent supply chain issues.

The ISM said is manufacturing PMI crept up to 61.1 in September from 59.9 in August, with a reading above 50 indicating growth in the manufacturing sector. The uptick surprised economists, who had expected the index to edge down to 59.6.

“Manufacturing performed well for the 16th straight month, with demand, consumption and inputs registering month-over-month growth, in spite of continuing unprecedented obstacles and ever-increasing demand,” said Timothy R. Fiore, Chair of the ISM Manufacturing Business Survey Committee.

He added, “Panelists’ companies and their supply chains continue to struggle to meet demand due to difficulties in hiring and a clear cycle of labor turnover, as workers opt for more attractive job opportunities.”

Sector News

Airline stocks showed a substantial move to the upside on the day, with the NYSE Arca Airline Index soaring by 5.8 percent to its best closing level in over three months.

Southwest Airlines (LUV) posted a strong gain after JPMorgan upgraded its rating on the company’s stock to Overweight from Neutral.

Significant strength was also visible among energy stocks, which moved higher along with the price of crude oil. Crude for November delivery climbed $0.85 to $75.88 a barrel.

Reflecting the strength in the energy sector, the Philadelphia Oil Service Index surged up by 3.4 percent and the NYSE Arca Oil Index jumped by 2.7 percent.

Financial, chemical, and software stocks also saw considerable strength on the day, moving higher along with most of the other major sectors.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved sharply lower during trading on Friday, with markets in China closed for a holiday. Japan’s Nikkei 225 Index plummeted by 2.3 percent, while Australia’s S&P/ASX 200 Index tumbled by 2 percent.

The major European markets also moved to the downside on the day. While the French CAC 40 Index closed just below the unchanged line, the German DAX Index and the U.K.’s FTSE 100 Index slid 0.7 percent and 0.8 percent, respectively.

In the bond market, treasuries moved notably higher, extending the uptick seen in the previous session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, slid 6.4 basis points to 1.465 percent.

Looking Ahead

The Labor Department’s closely watched monthly jobs report is likely to be in the spotlight next week, potentially overshadowing separate reports on factory orders, the U.S. trade deficit and service sector activity.

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