Stocks rebound after September slump, Dow posts best start to October since 2003

Stocks advanced on Friday, with equities recovering some losses after closing out a volatile month in the red.

The Dow outperformed compared to the other two major indexes, as shares of Merck (MRK) jumped after the drugmaker released positive data on its COVID-19 antiviral pill. The 30-stock index ended higher by more than 480 points, or 1.4%, and posted its best start to October since 2003. 

The S&P 500 also gained, adding about 1.2% as cyclical stocks led the way higher. The session also marked the blue-chip index’s best start to an October since 2007. The Nasdaq increased by 0.9%, and the small-cap Russell 2000 rose by nearly 2%. 

Friday’s moves come following a losing month for U.S. equities as a confluence of concerns about the monetary and fiscal policy backdrop compounded with ongoing jitters over the coronavirus and inflation. 

The S&P 500 ended a seven-month winning streak in September, posting an about 4.8% monthly decline. The Dow ended September lower by 4.4%. The Nasdaq underperformed, shedding 5.4% amid a broad rotation away from growth and technology stocks as expectations for inflation and higher rates took holding. 

“As I look at my ‘what am I going to be afraid of list’ today, there are a lot of things on that list,” Scott Wrenn, Wells Fargo Investment Institute senior global equity strategist, told Yahoo Finance on Thursday. “We don’t really think earnings are going to be that much of a mystery or concern to the market. We know we’re going to get out of this year with a reasonable amount of earnings growth. I think there is, though, the overriding theme of, are we going to have embedded inflation? What might the Fed do about it? Is the Fed going to remain easy? “Those types of things … I think those are the overriding concerns.”

“We’ve had such a big run-up in the market that to have a 5% pullback or something off the top after the market basically doubled in 15 months, I think you have to put this in the right context,” he added. “And while there’s a lot of things to worry about, many of them have a very low probability of causing a lot of long-term problems for the market.” 

As of Thursday’s close, the S&P 500 was still up about 15% so far for the year-to-date, buoyed by outperformance in the cyclical energy and financials sectors that would stand to benefit from rising commodity prices and interest rates. On Friday, investors eyed the latest print on personal consumption expenditures (PCE), which showed the biggest rise in inflation since 1991 in August. 

Heading into October, some strategists are bracing for more choppiness in equity markets, with more developments on monetary and fiscal policy set to emerge against what many expect will be a backdrop of moderating economic growth and corporate profits. 

“I think the pace of gains is just going to be slower. I think that’s not that surprising, given that in the second quarter, we were thinking that COVID was very close to an end, and then Delta put a dent in that. That’s really throwing us off a little bit,” Shawn Snyder, Citi U.S. Wealth Management head of investment strategy, told Yahoo Finance Live on Thursday. “Also, just a large confluence of events were happening in September. We have now Fed tapering. We have the ongoing D.C. drama and all those things that are just kind of leading to some weakness in equity markets.”

4:00 p.m. ET: Stocks end sharply higher, shaking off September slump

Here’s where the major equity indexes ended Friday’s session:

  • S&P 500 (^GSPC): +49.55 (+1.15%) to 4,357.09

  • Dow (^DJI): +483.20 (+1.43%) to 34,327.12

  • Nasdaq (^IXIC): +118.12 (+0.82%) to 14,566.70

2:30 p.m. ET: ‘I expect to see some further choppiness into October’: Strategist 

September marked the worst month for the S&P 500 since March 2020 – and according to some strategists, volatility could continue from here. 

“This last week’s trading environment has been extremely choppy, [and] I expect to see some further choppiness into October simply from a seasonal perspective,” Dave Mazza, Direxion managing director, told Yahoo Finance Live on Friday. “I expect to see some further choppiness into October simply from a seasonal perspective, and we’re heading into an earnings season that’s going to have really, really high expectations.”

“So I expect markets, until we get some clarity from some of the early reporters … it’s going to be difficult to really see markets settle,” he added. “I expect markets could fall another few percent here, but I do think right around earnings season we’re going to see it kind of find some stability.” 

10:46 a.m. ET: U.S. manufacturing activity picked up more than expected in September: ISM 

The domestic manufacturing sector showed a greater expansion of activity than expected in September, even as materials shortages curbed growth across goods-producing industries. 

The Institute for Supply Management’s manufacturing index rose to 61.1 in September from 59.9 in August, according to the firm’s closely watched monthly report. Readings above the neutral level of 50.0 indicate expansion in a sector. August’s reading marked the highest since May for the index.

Prices paid during the month increased, tracking a broad-based rise in inflation across the recovering economy. The employment index showed modest improvement, tipping back into expansionary territory with a reading of 50.2 in September from 49.0 in August. 

“Business Survey Committee panelists reported that their companies and suppliers continue to deal with an unprecedented number of hurdles to meet increasing demand,” Timothy Fiore, chair of the Institute for Supply Management, said in a press release. “All segments of the manufacturing economy are impacted by record-long raw materials lead times, continued shortages of critical materials, rising commodities prices and difficulties in transporting products. Global pandemic-related issues — worker absenteeism, short-term shutdowns due to parts shortages, difficulties in filling open positions and overseas supply chain problems — continue to limit manufacturing growth potential.”

10:12 a.m. ET: Merck shares surge by most since 2009 after positive antiviral COVID-19 pill data

Shares of Merck (MRK) surged by 12% at session highs Friday morning, posting the stock’s biggest rise in over a decade after the drugmaker released new data showing its new antiviral pill reduced the risk of patients’ hospitalization or death due to mild to moderate cases of COVID-19 by about 50%. 

The data stemmed from an interim analysis of the company’s Phase 3 study. Merck said it planned to seek an emergency use authorization in the U.S. “as soon as possible” for use of the oral antiviral medicine.

10:01 a.m. ET: Consumer sentiment ticked up in late September, but still held near 10-year low as inflation worries linger: U. Michigan 

Consumer sentiment was revised higher for late September, but still held near a decade low as concerns over the Delta variant and inflation dampened optimism.

The University of Michigan’s September consumer sentiment index came in at 72.8 in the final monthly reading, edging up from August’s 70.3 and the 71.0 previously reported for the month. Subindices tracking consumers’ assessments of current conditions and their expectations for the future were also revised higher. 

Consumers’ one-year inflation expectations also moderated in late September but held at a historically high level. Individuals now expect inflation to rise at a 4.6% clip over the next year, compared to the 4.7% seen previously. 

“Consumers do not view economic conditions as conducive to establishing an inflationary psychology, a self-fulfilling prophecy,” Richard Curtin, chief economist for the University of Michigan’s Surveys of Consumers, wrote in a press statement. “Instead, consumers have favored postponement due to what they still consider a transient spike in prices.”

“While this reaction may well fade in the months ahead, the shift toward postponement of purchases has been so significant that it could not be quickly reversed,” he added. “Even if transient, higher inflation has already decreased living standards, and further damage is anticipated as just 18% of all households anticipated income gains would be larger than the expected inflation rate.”

9:30 a.m. ET: Stocks open higher after September selling

Here’s where markets were trading Friday morning:

  • S&P 500 (^GSPC): +20.34 (+0.47%) to 4,327.88

  • Dow (^DJI): +213.19 (+0.63%) to 34,057.11

  • Nasdaq (^IXIC): +51.07 (+0.37%) to 14,504.49

  • Crude (CL=F): -$0.20 (-0.27%) to $74.83 a barrel

  • Gold (GC=F): +$1.30 (+0.07%) to $1,758.30 per ounce

  • 10-year Treasury (^TNX): -3.3 bps to yield 1.494%

9:10 a.m. ET: Bitcoin prices spike 10% in biggest jump since July 

Bitcoin (BTC-USD) prices jumped 10% Friday morning to top $47,800, representing the cryptocurrency’s biggest single-session spike in nearly three months. A catalyst for the move was not immediately apparent. 

The move came following a volatile month for the largest cryptocurrency by market capitalization. In September, bitcoin prices fell nearly 8% as concerns over a crackdown in China weighed on prices of bitcoin and other digital currencies. 

Other major tokens also gained Friday morning, with Ethereum (ETH-USD), the No. 2 cryptocurrency by market cap, up 8% to trade above $3,200. Litecoin (LTC-USD) and XRP (XRP-USD) rose by similar margins. 

8:41 a.m. ET: PCE inflation rose 4.3% in August over last year, rising by the most since since 1991

Personal consumption expenditures (PCE) rose at a faster-than-expected monthly and annual pace in August, underscoring persistent increases in underlying inflation as the economic recovery rolls on.

The broadest measure of PCE increased 0.4% in August compared to July, and by 4.3% compared to last year, according to the Bureau of Economic Analysis’ monthly report. The annual increase was the biggest since 1991.

PCE, excluding food and energy prices, rose 0.3% in August compared to July. This matched July’s rate and and came in above the 0.2% pace expected, according to Bloomberg data. Core PCE has risen on a month-over-month basis in every month since December 2020.

Over last year, core PCE increased 3.6%, also topping expectations for a 3.5% annual rate. This also marked the fastest year-over-year rise in core inflation in three decades. Core PCE serves as the Federal Reserve’s preferred gauge of underlying inflation.

8:33 a.m. ET: Personal income rose for a third straight month in August, spending increased more than expected

U.S. personal income and spending each held up solidly in August, with government social benefits and wage growth helping support consumers’ purchasing power. 

Personal income increased by 0.2% in August after rising 1.1% in July, according to the Bureau of Economic Analysis’ monthly data. The increase was in-line with consensus estimates, based on Bloomberg data. 

The rise in income came as a result of private-sector wage growth and ongoing government benefits, with Child Tax Credit payments under the American Rescue Plan taking place during the month, the BEA noted. Still, income gains were also offset by a drop in federal enhanced jobless benefits, since pandemic-era unemployment programs were ended across half of U.S. states by the end of the summer. 

Personal spending, meanwhile, rose slightly more than expected, increasing 0.8% in August versus the 0.7% rise anticipated. For July, however, spending was downwardly revised to reflect a 0.1% drop, down from the 0.3% increase previously reported.

7:40 a.m. ET Friday: Stock futures drift slightly higher

Here’s where markets were trading ahead of the opening bell Friday morning: 

  • S&P 500 futures (ES=F): +6.5 points (+0.15%), to 4,304.25

  • Dow futures (YM=F): +44 points (+0.13%), to 34,766.00

  • Nasdaq futures (NQ=F): +35.25 points (+0.24%) to 14,717.75

  • Crude (CL=F): -$0.41 (-0.55%) to $74.62 a barrel

  • Gold (GC=F): -$2.50 (-0.14%) to $1,754.50 per ounce

  • 10-year Treasury (^TNX): -3.4 bps to yield 1.493%

6:15 p.m. ET Thursday: Stock futures rise, steadying after September drop

Here were the main moves in markets as of Thursday evening:

  • S&P 500 futures (ES=F): +5.75 points (+0.13%), to 4,303.50

  • Dow futures (YM=F): +40 points (+0.12%), to 34,762.00

  • Nasdaq futures (NQ=F): +23.25 points (+0.16%) to 14,705.75

NEW YORK, NEW YORK – SEPTEMBER 30: Traders work on the floor of the New York Stock Exchange (NYSE) on September 30, 2021 in New York City. In afternoon trading the Dow was down over 250 points as investors continue to worry about inflation, wages and supply chain issues. (Photo by Spencer Platt/Getty Images)

Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter