U.S. stocks opened higher Friday, building on a bounce in the previous session that marked what’s been called one of the craziest market days in history, as investors weighed a round of results from big banks with third quarter earnings reporting season getting under way.
What’s happening
- The Dow Jones Industrial Average DJIA, -0.33% rose 267 points or 0.9%, to 30,305.
- The S&P 500 SPX, -0.96% was up 23 points, or 0.6%, at 3,693.
- The Nasdaq Composite rose 60 points, or 0.6%, to 10,709.
On Thursday, the Dow erased a plunge of nearly 550 points to end 828 points higher, while the S&P 500 bounced back from a loss of more than 2% to end 2.6% higher, and the Nasdaq Composite jumped 2.2%.
The Dow’s 2.8% rise was the largest one-day gain since Nov. 9, 2020.
What’s driving markets
Analysts cited a number of factors to explain the huge rise in stocks on Thursday, including technical and positioning considerations after a steep selloff that had seen the S&P 500 index tumble for six sessions in a row to end Wednesday at its lowest since November 2020.
“Among the most frequent explanations is that the most pessimistic of all possible scenarios were built into prices: a 75-point rate hike at the next two meetings,” said Alex Kuptsikevich, senior market analyst at FxPro, in a note. “After this, market participants turned their attention to substantial discounts to prices from their highs with a relatively healthy economy that continues to create jobs and raise wages,”
But caution still prevails on Friday.
“Despite October’s notoriety as a ‘bear market killer’ and an auspicious intraday move, investors should maintain a certain degree of caution. A real change in trend requires a shift in fundamentals. And those changes are still not easy to identify,” Kuptsikevich said.
Rick Rieder, the chief investment officer for fixed income at BlackRock, called Thursday’s gyrations one of the “craziest” in history, coming after data showing U.S. September inflation running at a hotter-than-expected pace. The S&P 500 had fallen for five consecutive sessions ahead of the CPI report.
“This snapback seems like the product of protective hedges being unloaded in the options market, which generated enough upside momentum to trigger a broader wave of short-covering,” said Marios Hadjikriacos, senior investment analyst at XM.
See: Why stocks scored a historic bounce after another hot inflation report
BlackRock’s Rieder advised investors to consider parking their money in short-term bonds, a point recently echoed by hedge-fund legend Ray Dalio.
Shares of JPMorgan Chase & Co. JPM, +1.99% jumped more than 5% in premarket trade after the bank beat Wall Street targets for earnings and revenue.
Analysts were also weighing results from Wells Fargo & Co. WFC, +3.09% and Morgan Stanley MS, -4.01%, and Citigroup Inc. C, +1.21%.
See: JPMorgan profit falls but beats estimates while Wells Fargo misses
Investors were also monitoring developments in the U.K., where now-former Chancellor of the Exchequer Kwasi Kwarteng stepped down at the behest of Prime Minister Liz Truss. Yields on U.K. government bonds spiked after Kwarteng presented a budget plan that included large tax cuts in late September, sparking a crisis that required the Bank of England to step in with an emergency buying program. U.K. bond yields have dropped on Friday on indications many of the planned tax cuts will be reversed.
Data showed U.S. retail sales were unchanged in September, coming in below forecasts for a 0.3% rise. Excluding autos, sales rose 0.3%.
Friday will also see the October release of the University of Michigan consumer sentiment report, due for release. Fed Gov. Lisa Cook also is scheduled due to speak.
Companies in focus
- Wells Fargo WFC, +3.09% shares rose 3.2% after the bank posted stronger-than-expected revenue for the third quarter, offsetting a profit miss.
- Shares of Morgan Stanley MS, -4.01% fell 1.8% after the investment bank missed Wall Street’s targets for earnings and revenue amid a drop in deal activity.
- Citigroup C, +1.21% shares rose 0.9% after the bank topped Wall Street forecasts on earnings and revenue.
- Kroger Co. KR, -2.73% announced a $24.6 billion deal to buy Albertsons Cos. Inc. ACI, -6.20%. Under the terms of the merger agreement, Kroger will acquire all of the outstanding shares of Albertsons’ common and preferred stock for an estimated $34.10 per share. Kroger shares fell 3%, while Albertsons was off 6.5%. Shares of Albertsons jumped more than 11% Thursday on reports of a potential deal, while Kroger rose 2%.
- Beyond Meat Inc. BYND, -6.36% shares rose 1.2% after the plant-based food company issued a revenue warning, announced a plan to cut about 200 workers and said it’s cutting other costs as it makes a strategic shift aimed at achieving positive cash flow operations.
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