The stock market remained a fight between bulls and bears as Treasury yields surged to fresh 16-year highs. The Dow Jones and S&P 500 undercut recent lows during the week, though the Nasdaq rally attempted continued on. The major indexes came off lows and moved solidly higher Friday, with several leading stocks clearing buy points or early entries. Crude oil and gasoline futures tumbled, slamming energy stocks. Tesla cleared an early entry despite a big delivery miss and fresh price cuts, but then fell back. Techs accounted for most of the stocks holding up or clearing buy points.
Stock Market Rally Offers Some Hope
The S&P 500 and Dow Jones undercut recent lows during the week, but did bounce back late in the week in fresh rally attempts. The Nasdaq hasn't staged a follow-through day to confirm a new uptrend, but Friday's action was encouraging. On the plus side, the major indexes rebounded higher Friday, with several leading stocks flashing buy signals. The 10-year Treasury yield skyrocketed as high as 4.89% on Friday, but pared weekly gains somewhat. Crude oil fell and gasoline futures hit 2023 lows amid signs of weakening demand.
Robust hiring in September topped off a week of strong data that to finish a blistering third quarter that could see close to 5% GDP growth.
Employers added 336,000 jobs, about double expectations, while job gains for July and August were revised up by 119,000. That sent Treasury yields spiking and raised odds of another rate hike because current yields haven't been enough to slow growth yet.
Still, the jobs data wasn't as alarming on closer view. Average hourly wages rose a tame 0.2% for a second straight month, lowering the 12-month increase to 4.2%. The jobless rate held at 3.8% for a second month, after jumping from 3.5% in August. Plus, a big 119,000 upward revision to combined job gains in July and August all came from government employment, which may have reflected seasonal adjustment issues for public school employees.
Earlier in the week, the Labor Department reported that job openings unexpectedly rose to 9.6 million in August, up nearly 800,000 from the level initially reported for July.
In other data, the U.S. trade deficit shrank by $6.4 billion in August to $58.3 billion, nearly a three-year low. The goods deficit fell about $5.5 billion to $84.5 billion, while the surplus in services grew around $1 billion to $26.2 billion. A lower-than-expected trade deficit implies upward revisions to GDP forecasts.
Factory output has been a soft spot for the economy, but firmed up a bit in September. The Institute for Supply Management's manufacturing survey index rose 1.4 points to 49, closer to the neutral 50 level.
Tesla Cuts Prices After Delivery Miss
Tesla delivered 435,059 EVs in Q3, down 6% vs. Q2 and well below recently lowered analyst views. The EV giant blamed factory upgrades, but there was a lot of existing inventory. Bulls are betting on a fourth-quarter rebound in deliveries with the revamped Model 3 in China and the expected Cybertruck launch. Tesla also rolled out a new, lower-end Model Y variant in the U.S. that is $3,750 cheaper than the prior base version. It later cut prices on other Model Y variants and the Model 3. Shares surged past an aggressive entry, but trimmed gains late in the week.
Crude Oil Dives On Weak Demand
Crude oil futures fell sharply while gasoline futures plunged to a 2023 low amid growing signs of weakening energy demand. U.S. crude oil inventories fell modestly last week, according to the Energy Information Administration on Wednesday. But gasoline inventories swelled, while gasoline demand fell. Prices at the pump, which have started to slide, should fall significantly in the coming weeks. Energy stocks broadly fell along with oil and gas this week.
Exxon Mobil reportedly is near a deal to buy Pioneer Natural Resources for roughly $60 billion.
China EV Sales
China EV sales remained strong in September, defying headwinds. Tesla archrival BYD sold more than a quarter-million electric vehicles for the month to cross the 2-million mark for the year. Notably, BYD sold almost as many battery electric vehicles as Tesla during the third quarter, and could take the crown in the current quarter. Startups Li Auto and XPeng also reported robust September and Q3 deliveries after launching new and cheaper electric vehicles. Nio sales fell for a second straight month in September. Their sales gains come amid a price war in a slowing economy.
Tech Titans Extend Historic Dominance Vs. Small Caps
U.S. Auto Sales Rise
New car sales in the U.S. rose in the third quarter despite steep interest rates, data showed. Analysts said pent-up demand from consumers and fleet customers is fueling the market, as inventories rebound. General Motors grew sales by 21%, Toyota by 12%, and Ford F by 8%. Both GM and Ford said they are seeing EV sales momentum — from a low base — after supply and production issues. But car stocks declined as the autoworkers' strike expanded.
The autoworkers' strike extended into its third full week, with strike costs nearing $4 billion and automakers bracing for a further possible expansion to their high-margin pickup truck plants.
News In Brief
Rivian on Monday reported better-than-expected third-quarter vehicle deliveries of 15,564, with 16,304 vehicles produced. The EV startup said it expects to reach its goal of 52,000 in annual production in 2023. Late Wednesday, Rivian announced plans to offer $1.5 billion in convertible debt, while also reporting preliminary Q3 revenue in line with views. Shares, which had rallied earlier in the week, plunged Thursday.
Eli Lilly agreed to pay $1.4 billion cash for Point Biopharma. Point is working on treatments for cancer that tie a radioisotope to a molecule capable of targeting tumor cells. This allows the drug to direct radiation directly to cancer cells. Point stock launched to a two-year high on the news. Lilly shares dipped, but rose strongly for the week. Lantheus jumped on the news, but slashed gains. Lantheus is partnered with Point Bio on its two leading assets, including an experimental prostate cancer treatment.
Palantir shares got a boost after Bloomberg reported the data analytics firm was the front-runner for a big government contract. The U.K. is on track to announce Palantir as the winning bidder for an overhaul of data systems at the National Health Service. The five-year contract, which could be extended by two years, is worth as much as $579 million.
Aehr Test Systems beat Wall Street's targets for its fiscal first quarter but kept its outlook unchanged for the full year, disappointing investors. The semiconductor equipment vendor's EPS surged 260% with revenue up 93% to $20.6 million.
