It’s Been A Good Week For Stocks And Bonds

Key Takeaways

• Equities Up 5% This Week
• Bond Yields Tumble
• Employment Numbers Weaker Than Expected

It’s been a stellar week for equities. The S&P 500 ended last week at 4117. Thursday it closed at 4317, up nearly 5%. The Nasdaq Composite has turned in an equally impressive run as well, also up nearly 5%. At the same time, we’ve seen a massive rally in bonds as interest rates tumbled this week. We’ll see what impact today’s employment report has as we close out the week.

It was just about two weeks ago when yields on the 10-year note touched 5%, a level not seen in over a decade. In premarket trading, that yield is down to 4.64%. If you’re new to trading or uninitiated, a 36-basis point move would be akin to an athlete hitting for the cycle in baseball, posting a triple-double in basketball and recording a hat trick in hockey all in the same day. If that still means nothing to you, then I’ll simply say, what we’re seeing with rates is unique.

While rates have been tumbling, we’re also getting very positive earnings reports. According to an article in today’s Wall Street Journal, 80% of the S&P 500 companies that have reported earnings have topped estimates, that compares with an average of 67%. Some stocks, such as Starbucks
SBUX
, which was up 9.5% Thursday and Roku, up 31%, have been handsomely rewarded. But what will happen to the biggest name of them all, Apple
AAPL
, remains to be seen.

Last night after the close, Apple reported earnings that beat across the board. However, the company issued a grinch-like holiday forecast and that sent shares down. In premarket activity, Apple is off by around 2%. One thing worth keeping in mind though is the rally Apple has had into earnings. After hitting a low of just over $165.50 last week, the stock hit a high on Thursday of nearly $178. Therefore, despite being down from yesterday’s close, Apple has still had a nice week.

The big news today; however, is the employment report. Estimates were calling for 180 thousand new jobs created and an unemployment rate of 3.8%. The actual numbers showed 150 thousand jobs added and an unemployment rate of 3.9%. Employment figures for both August and September were also revised slightly lower. One caveat to keep in mind with today’s report is the impact of the United Auto Workers strike. The motor vehicles category saw a loss of 33 thousand jobs largely attributable to the strikes. Still, the weaker than expected numbers offer further hope that inflation is coming under control.

All in all, it’s been a good week for investors and in premarket trading following the employment report, there’s reason to hope we’ll end this week on a high note. Not only have yields dropped and equities gained, but the gains have come on very strong volume, which is a positive. I often use the metaphor of a shopping cart in discussing the relationship between prices and volume. It’s very easy to push a shopping cart with nothing in it, much as it’s much easier for prices to move on low volume. Fill that cart up with groceries and suddenly it takes quite a bit more effort and determination to push it around. That’s similar to what we’re seeing this week with strong volume making a concerted effort at pushing prices higher. Both the S&P 500 and Nasdaq Composite are back comfortably above their 21 and 200-day moving average, let’s see if they can also break their respective 50-day average next. As always, I would stick with your investing strategy and long term plans.

tastytrade, Inc. commentary for educational purposes only. This content is not, nor is intended to be, trading or investment advice or a recommendation that any investment product or strategy is suitable for any person.