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Stock Market News for Oct 4, 2021

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U.S. stocks rebound on Friday, the first trading day of the fourth quarter of 2021. Wall Street tried to regain some lost ground after September’s mayhem. Positive development on coronavirus treatment front and some better-than-expected economic data restored investors’ confidence on risky assets like equities. All three major stock indexes ended in green. However, for the week as a whole, all these indexes finished in negative territory.

How Did The Benchmarks Perform?

The Dow Jones Industrial Average (DJI) jumped 1.4% or 482.54 points to close at 34,326.46. Notably, 26 components of the 30-stock index ended in the green while 4 in red. This was the blue-chip index’s best start to October since 2003.

The tech-heavy Nasdaq Composite finished at 14,566.70, rising 0.8% or 118.12 points due to strong performance by large-cap technology stocks. Meanwhile, the S&P 500 climbed 1.2% to end at 4,357.04. This was blue-chip index’s best start to October since 2007. All eleven sectors of the benchmark index closed in positive territory.

The Energy Select Sector SPDR (XLE), the Financials Select Sector SPDR (XLF), the Technology Select Sector SPDR (XLK), the Industrials Select Sector SPDR (XLI), the Materials Select Sector SPDR (XLB), the Communication Services Select Sector SPDR (XLC) and the Real Estate Select Sector SPDR (XLRE) climbed 3.4%, 1.7%, 1.5%, 1.4%, 1.6%, 1.7% and 1.1%, respectively.

The fear-gauge CBOE Volatility Index (VIX) dropped 8.6% to 21.15. A total of 11.02 billion shares were traded on Friday, lower than the last 20-session average of 10.70 billion. Advancers outnumbered decliners on the NYSE by a 2.17-to-1 ratio. On Nasdaq, a 1.63-to-1 ratio favored advancing issues.

Positive Development on Coronavirus Treatment

Merck & Co. Inc. (MRK - Free Report) along with its development partner Ridgeback Biotherapeutics revealed that their oral antiviral treatment molnupiravir can reduces the risk of hospitalization or death by around 50% for patients with mild or moderate cases of COVID-19. The drug was effective against all variant of coronavirus including the highly infectious Delta strain.

Merck said an interim analysis of a phase 3 study of the oral pill has revealed these impressive results. The phase 3 trial was conducted at more than 170 sites across various countries including the United States., Brazil, Italy, Japan, South Africa, Taiwan and Guatemala. The company said that they will be submitting their data to the FDA imminently and will seek an emergency authorization.

Consequently, shares of Merck jumped 8.4% following the news. Buoyed by this development, shares of reopening stocks, especially air travel and leisure travel stocks, like American Airlines Group Inc. (AAL - Free Report) , Delta Air Lines Inc. (DAL - Free Report) , Norwegian Cruise Line Holdings Ltd. (NCLH - Free Report) and Royal Caribbean Cruises Ltd. (RCL - Free Report) popped 5.5%, 6.5%, 6% and 3.8%, respectively. All five stocks carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Economic Data

The Department of Commerce reported that personal income rose 0.2% in August after climbing 1.1% in July. The consensus estimate was also 0.2%. Personal savings rate dropped to 9.4% in August. July’s data was revised upward to 10.1% from 9.6% reported earlier. Consumer spending rebounded to 0.8% in August beating the consensus estimate of 0.6%. July’s data was revised downward to a drop of 0.1% from a gain of 0.3% reported earlier.

The personal consumption expenditure (PCE) price index rose 0.4% in August. July’s data was revised downward from a decline of 0.1% to a drop of 0.5%. Year over year, the PCE inflation jumped 4.3% in August, marking its biggest monthly increase since 1991.

The core (excluding volatile food and energy items) PCE price index rose 0.3% in August, remained flat sequentially. However, the consensus estimate was 0.2%. Year over year, the core PCE inflation – Fed’s favorite gauge of inflation - jumped 3.6% in August, marking its biggest monthly increase since 1991. August’s reading was well above the Fed’s long-term target rate of 2%. Notably, the core PCE inflation has risen on a month-over-month basis in every month since December 2020.

The University Michigan reported that the final reading of the U.S. consumer sentiment came in at 72.8% compared with preliminary reading of 71% and August’s reading of 70.3%. The consensus estimate was 71.3%.

The Institute of Supply reported that the U.S. manufacturing PMI rose to 61.1% in September, its highest since May. The consensus estimate was 59.6% and August’s reading was 59.9%. Notably, any reading above 50% means expansion in manufacturing activities.

Construction spending in August was almost flat sequentially compared with the consensus estimate of an increase of 0.3%. Construction spending in July was up 0.3% sequentially.

Weekly Roundup

Last Week was a devastating one for Wall Street. The Dow dropped 1.4%, marking its biggest weekly decline since the week ending Sep 10. The S&P 500 declined 2.2%, reflecting its worst weekly drop since the week ending Feb 26. The Nasdaq Composite plummeted 3.2%, also its biggest weekly drop since the week ended Feb 26. Concerns about slowing economic growth, higher inflationary pressure and gradual fading out of fiscal and monetary stimulus dented market participants confidence.

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