US shares tumble in early October, Dow rising 500 factors
US stocks rose on Friday as news of new oral treatment for Covid-19 boosted stocks of companies tied to the economic recovery.
The Dow Jones Industrial Average rose 517 points, or around 1.5%. The S&P 500 rose 1.2% while the tech-heavy Nasdaq Composite rose 0.8% as it tried to break a five-day losing streak.
Dow member Merck’s shares rose 9% after the drug maker and Ridgeback Biotherapeutics said their oral antiviral treatment for Covid-19 reduced the risk of hospitalization or death in patients with mild or moderate cases by 50%. The companies plan to obtain emergency approval for treatment.
Merck’s new drug appeared to be a boost in travel stocks. Royal Caribbean and Las Vegas Sands stocks were up more than 3%. Southwest Airlines led a profit on airline stocks after JPMorgan upgraded the stock, saying most of the group was worth buying for a trade. Bank stocks also rose, helping the Dow outperform.
“We saw this rotation back to the so-called reopening games and the more cyclical areas, which I think makes a lot of sense over the next few weeks as we think about improving the Covid trends, with cases going back from the previous month’s peak and the news.” about the Merck pill appear promising, “said Angelo Kourkafas, investment strategist at Edward Jones.
Vaccine stocks, including Moderna, fell after the Merck news.
The yield on 10-year government bonds fell back below 1.50% on Friday. A price jump until the end of September wiped out technology stocks.
The market has just ended a turbulent September as fears of inflation, slowing growth and rising interest rates kept investors nervous. The S&P 500 ended the month down 4.8%, breaking a seven month winning streak. The Dow and Nasdaq Composite were down 4.3% and 5.3%, respectively, and had their worst months of the year.
“A combination of slowing growth, less responsive monetary policy, China’s headwinds, weakening fiscal stimulus and gnawing supply chain bottlenecks have come together to weigh on investor sentiment in the fall and fourth quarter of 21,” said Chris Hussey, managing director at Goldman Sachs, said in a note.
Ten of the eleven S&P 500 sectors suffered losses in September, leading to a downward trend due to a monthly decline in commodity stocks of 7.4%. With an increase of over 9%, energy is the best performer of the month.
The S&P ended Thursday 5.2% below its all-time high in early September, the first 5% pullback of 2021. However, the broad equity benchmark is still up nearly 15% year-over-year.
“It’s just a squiggle. If we zoom out, it will look like nothing in 12 months. I know investors are nervous and there is a lot of headwinds here, but as you know, it often is when the wall of worry is high is.” a good opportunity for investors, “Fundstrat’s Tom Lee said in the mid-term report.
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On the data front, personal income rose 0.2% in August, as expected. The price index for core private consumption rose 3.6% year-on-year, the largest increase in more than 30 years, slightly above the estimate of 3.5% of the economists surveyed by Dow Jones.
While October is known for notable market crashes, it usually marks the start of a better seasonal period for stocks. The S&P 500 posted an average gain of 0.8% in October, according to the Stock Trader’s Almanac. According to the Almanac, stocks rose 1.6% and 1.5% on average in November and December.
Congress was ready to prevent the government from closing on Thursday. The Senate and House of Representatives both passed a short-term funds bill that would keep the government going through December 3, and sent it to President Joe Biden for signature. Biden was also scheduled to travel to Capitol Hill on Friday to help negotiate a major infrastructure bill.