Day Traders Diary

10/5/22

The major averages fell on Wednesday, putting Wall Street on track to give back some of its sharp gains from the last two sessions. The Dow Jones Industrial Average declined 250 points, or 0.9%. The S&P 500 is down 40 points or 1% while the Nasdaq Composite is down 160 points or 1.4%.

Treasury yields rebounded Wednesday, weighing on stocks. The 10-year rate traded 10 basis points higher at 3.713% after briefly dipping below 3.6% in the previous session.

Payroll services firm ADP issued its jobs report, which showed the addition of 208,000 jobs in September, which is better than expected by Dow Jones estimates. Traders are still looking ahead to Friday's release of the nonfarm payrolls report.

On Tuesday the Dow jumped about 825 points, or 2.8%. The S&P 500 gained nearly 3.1%, while the Nasdaq Composite advanced 3.3%. Those gains, which come on the back of falling bond yields, led to the strongest two-day stretch for the S&P 500 since 2020.

Meanwhile, a weakening in the most recent job openings data had some investors considering whether the Federal Reserve will slow the pace of interest rate hikes.

Market participants wondered whether those signs could mean markets have finally priced in a bottom after the sharp declines in the prior quarter.

U.S. labor market showed strength in September, ADP jobs report shows

Businesses added 208,000 jobs for the month of September, payroll services firm ADP reported Wednesday. That number is better than the 200,000 Dow Jones estimate and ahead of the upwardly revised 185,000 in August, according to ADP.

Trade, transportation and utilities saw a jobs gain of 147,000, while professional and business services and education and health services also posted large increases.

ADP's report comes two days before the closely watched nonfarm payrolls report issued by the Bureau of Labor Statistics. Federal Reserve officials are watching the jobs numbers closely as the central bank looks to stem high inflation.

These companies are making headlines before the bell:

Morgan Stanley, Goldman Sachs – Shares of the two banks slid 1.4% and 1.6%, respectively, after Atlantic Equities downgraded both stocks due to the potential of declining investment banking volume.

General Motors – The auto maker's shares dipped 1.8% after Morgan Stanley lowered its price target on the stock.

Bionano Genomics – Shares jumped 11.3% after the company published a study on using optical genome mapping to investigate liver cancer.

Two-day huge move in market offers hope for stronger gains ahead

While single-day bursts often are signs of a bear market bounce, two-day rallies of more than 2% historically have signaled stronger gains in the future.

There have been 31 such instances for the S&P 500 since 1953, and the index has averaged a 0.61% gain one week later following those moves, according to Bespoke Investment Group. While gains tend to muddle along shortly after, the 12-month return typically has been 14.6% and the S&P 500 has been higher 80% of the time.

Having rallies off that size is highly unusual to start the month — Bespoke reports that there was only one other time, in August 1984, when a month began with consecutive gains of 2%.