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Stock Market News for Oct 6, 2021

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Wall Street rebounded on Tuesday after a sharp decline on the previous trading session. Technology stocks regained momentum despite soaring yield on government bonds. However, investors remained concerned on expectations for more inflationary pressure due to higher oil prices and Congressional impasse on debt ceiling issue. All three major stock indexes gained sharply.

How Did The Benchmarks Perform?

The Dow Jones Industrial Average (DJI) rose 0.9% or 311.75 points to close at 34,314.67. Notably, 26 components of the 30-stock index ended in the green while 4 in red. The tech-heavy Nasdaq Composite finished at 14,433.83, climbing 1.3% or 178.35 points due to strong performance by large-cap technology stocks.

Meanwhile, the S&P 500 increased 1.1% to end at 4,345.72. Nine out of eleven sectors of the benchmark index closed in positive territory and two in red. The Technology Select Sector SPDR (XLK), the Communications Services Select Sector SPDR (XLC), the Financials Select Sector SPDR (XLF) and the Industrials Select Sector SPDR (XLI) rallied 1.4%, 1.5%, 2% and 1,1%, respectively.

The fear-gauge CBOE Volatility Index (VIX) was down 7.2% to 21.30. A total of 10.3 billion shares were traded on Tuesday, higher than the last 20-session average of 10.9 billion. Advancers outnumbered decliners on the NYSE by a 1.45-to-1 ratio. On Nasdaq, a 1.43-to-1 ratio favored advancing issues.

Broad-Based Rally

Yesterday’s stock market rally was broad-based. Technology behemoths like Apple Inc. (AAPL - Free Report) and Alphabet Inc. (GOOGL - Free Report) gained 1.4% and 1.8% respectively. This happens despite the yield on the benchmark 10-Year U.S. Treasury Note rose 5 basis points to 1.528%.

However, higher market risk-free returns bode well with financial sector. Consequently, shares of major banks like The Goldman Sachs Group Inc. (GS - Free Report) and Wells Fargo & Co. (WFC - Free Report) rallied 3.1% and 2%, respectively. Leisure travel operator Norwegian Cruise Line Holdings Ltd. (NCLH - Free Report) rose 1.1% and airlines like American Airlines Group Inc. (AAL - Free Report) was up 0.4%.

All above-mentioned stocks carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Crude Oil Prices Surge

Oil prices rallied on Tuesday following the decision of the OPEC and Russia-led consortium that production will increase in measured steps, gradually each month, including 400,000 barrels a day increase in November.

As a result, the price of the U.S. benchmark West Texas Intermediate rose 1.7% to $78.93, marking the highest since Oct 21, 2014, and the price of global benchmark the Brent crude was up 1.6% to $82.56, highest since Oct 10, 2018.

U.S. Government Debt Ceiling Issue

President Joe Biden has warned that the U.S. government will face the risk of defaulting on its own debt unless the Congress raise the Federal borrowing limit by Oct. 18. Treasury Secretary Janet Yellen said this stalemate may lead to severe economic recession. The Congressional Budget Office has already said that government most likely will run out of cash near the end of October or beginning of November if lawmakers fail to raise or suspend the debt limit.

Economic Data

The Department of Commerce reported that the U.S. trade deficit climbed 4.2% to a record-high $73.3 billion in August. The consensus estimate was $70.5 billion. July’s data was revised downward from a deficit of $70.1 billion to $70.3 billion. Notably, inflation adjusted trade deficit in August increased $1.9 billion to $101.8 billion. Overall, imports increased 1.4% to $287.0 billion, the highest on record. Overall exports gained 0.5% to $213.7 billion in August, the highest since May 2019.

The Institute of Supply Management (ISM) reported that its U.S. services sector purchasing managers’ index (PMI) rose to 61.9% in September from 61.7% in August. The consensus estimate was 60%. Notably, any reading above 50% means expansion in services activities while a reading above 60% is generally recognized as exceptional. A record number of 17 out of 18 service-related industries tracked by the ISM reported increase in new orders and production.

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