Day Traders Diary

10/28/22

The major averages surged on Friday despite a tumble in Amazon shares after economic data pointed to slowing inflation and a steady consumer. The Dow Jones Industrial Average closed up 828 points, or about 2.6% at 32,861. The S&P 500 added nearly 2.5% or 93 points to 3,901. The Nasdaq Composite ended up 309 points or 2.9% at 11,102.

On a weekly basis, the major indexes made notable gains. It was the fourth positive week in a row for the Dow, a first since a five-week streak ending in November 2021. The 30-stock index is up 5.7% this week in its best performance since May. It's also on track for its best month since January 1976.

The S&P 500 and the Nasdaq are up 3.9% and 2.2%, respectively, for the week.

The stock market has fractured this week as investors dumped technology shares following weak results and outlooks from Microsoft, Alphabet and Meta and rotated into economically sensitive stocks that will benefit if the U.S. economy can skirt a recession. Meanwhile, they have found hope in data that came out over the course of the week indicating inflation may be easing, increasing optimism that the Federal Reserve could break from its trend of 75 basis point rate hikes after the November meeting.

Amazon plunged by 10% after the company posted weaker-than-expected quarterly revenue and issued disappointing fourth-quarter sales guidance Thursday. Apple shares were initially lower too in extended trading Thursday after the company reported weaker-than-anticipated iPhone revenue, but the stock has reversed and was up more than 7%. The company beat Wall Street estimates for quarterly earnings and revenue.

Apple and other more positive performers, like Intel, have given investors footholds within what some see as a particularly tumultuous tech sector, subsequently providing upward pressure to the tech-heavy Nasdaq, said Jay Hatfield, CEO of Infrastructure Capital Management. He said the market was also boosted by oil giants Chevron and Exxon Mobil, up 0.6% and 2.8%, respectively, after both reported beating expectations before the bell.

The market got a boost after the core personal consumption expenditures price index in September increased 0.5% from the previous month and 5.1% from a year ago, still high but mostly in-line with expectations. This is the preferred gauge of inflation for the Federal Reserve. Personal spending rose 0.6%, more than expected, the data showed.

On Friday, Simplify launched a Stable Income ETF (BUCK) and Enhanced Income ETF (HIGH). Both funds plan to sell option spreads on broad indexes in order to generate income and invest in short duration debt.

Nationwide's chief of investment research Mark Hackett notes that "the tone of the market is shifting, with investor sentiment and momentum showing significant improvement, and the market higher in three of the past four weeks. While the fundamental picture remains challenged, technical rebounds almost always predate a fundamental turnaround, as investors realize that too much negativity is priced into markets."