Stock Markets: Brief reprieve for investors

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Stocks climbed, yields retreated
U.S. stocks climbed Wednesday and Treasury yields retreated, helping the Dow Jones Industrial Average break its three-day losing streak. The pan-European Stoxx 600 dipped 0.14%. Swiss drugmaker Sandoz, a spinoff from Novartis, began trading Wednesday but dropped around 17% on lower-than-expected valuation.

Lower-than-expected payroll growth
Private payrolls grew just 89,000 for September, according to ADP. That’s almost half of the 160,000 estimate from economists, and sharply lower than the upwardly revised figure of 180,000 in August. Another sign the labor market could be loosening: Annual wage growth slowed to 5.9%, the 12th consecutive monthly decline.

Preparing for monthslong strikes
General Motors secured a new $6 billion line of credit to prepare itself for the possibility of a monthslong strike, CFO Paul Jacobson told CNBC. The United Auto Workers union strikes have already cost GM $200 million during the third quarter, according to the automaker. Ford, another automaker affected by the strikes, also obtained a new $4 billion line of credit in August.

Frontrunners for Speaker
U.S. Representatives Jim Jordan and Steve Scalise have emerged as frontrunners to replace Kevin McCarthy as House Speaker. Jordan’s a founding member of the hardline conservative House Freedom Caucus, while Scalise’s pitching himself as a consensus builder. Former U.S. President Donald Trump, who’s currently in the middle of a civil fraud trial, was also floated as a possible speaker.

[PRO] Attractive bank stocks
This week’s jump in bond yields could hurt bank balance sheets. As yields move inversely with bond prices, banks with long-term Treasurys could be holding on to losses. And that fear’s weighing on bank stocks. But Bank of America said this could be a buying opportunity for long-term investors — especially for these bank stocks trading at an attractive level.

Investors got a brief reprieve from bad news and rising costs yesterday, which helped to ease pressure from stocks.

Tuesday’s JOLTS report stunned investors with its higher-than-expected figure for jobs openings in August. But fears that the labor market’s still tight — which increases the chance the Federal Reserve would hike rates in November — were somewhat assuaged by the cooler-than-expected September payrolls report from ADP.

Additionally, oil prices ebbed yesterday, diminishing another source of inflationary worry. Both November futures for West Texas Intermediate crude and December futures for Brent fell around 5.6% to $84.22 and $85.81 a barrel, respectively. Those are the lowest prices for oil futures since August.

Finally, the ISM nonmanufacturing index for September came in at 53.6. It’s a slight dip from August’s reading of 54.5, but, at a level above 50, still indicates an expansion of service activity in the U.S. That’s what soft-landing proponents want to see: Continuing growth, but not too hot.

All those positive movements pushed down Treasury yields Wednesday. The yield on the 10-year note dropped nearly 7 basis points to 4.735% while the 2-year yield fell 9 basis points to 5.054%.

This gave stocks a chance to catch their breath (Tesla, notably, jumped 5.93%). The Dow Jones Industrial Average added 0.39%, snapping three consecutive sessions of losses. The S&P 500 rose 0.81% and the Nasdaq Composite jumped 1.35%. The Cboe Volatility Index, commonly known as Wall Street’s fear gauge, pulled back by nearly 1 point.

But this might just be a momentary rally.

“I don’t think you get a broader [rally] participation until rates ease up, and that’s only if rates ease without some sort of financial crisis or hard landing recession,” said Ross Mayfield, investment strategy analyst at Baird.

Echoing Mayfield, Liz Young, SoFi’s head of investment strategy, said, “Obviously, we’re getting a little reprieve today, but I think it’s just that.”

“It’s a brief reprieve.”