For the week as a whole, the S&P 500 fell 0.27%, the Dow Jones declined 1.26%, while the Nasdaq Composite rose 0.45%.
In the first trading session of the week (September 28), all three major indices fell after US President Donald Trump rejected Iran's seven-day ceasefire proposal, pushing oil prices and bond yields higher. Jose Torres, a market analyst at Interactive Brokers, believes the prolonged stalemate between Washington and Tehran is disrupting the market right from the start of the week.
On September 29th, US stocks continued to decline slightly as government bond yields rose ahead of the release of key inflation and labor market data. The 30-year Treasury yield briefly touched 5.6206%, its highest level since June 2002, while the 10-year yield edged up to 5.293%, its highest level since June 2007. The decline in stocks then narrowed after New York Fed President John Williams indicated the Fed still has ample time to carefully consider economic data before deciding whether to continue raising interest rates, reducing the probability of a Fed rate hike at its October meeting to 51.5%, down from nearly 70% earlier in the session.
On September 30th, the US market saw mixed results, with the Nasdaq rising slightly while the Dow Jones and S&P 500 declined. Positive economic data, including an upward revision of second-quarter GDP growth to 2.2% and better-than-expected private sector employment figures, provided some support to market sentiment, but long-term bond yields remained high. Arun Sundaram, an expert at CFRA Research, an independent investment research firm, suggested that the higher bond yields reflect expectations of stronger economic growth driven by the AI wave, but the big question is whether these yields will break the upward trend in the stock market.
US stocks recovered on October 1st, after falling earlier in the session. The market was pressured at the start of trading as initial jobless claims fell to 197,000, lower than expected. The yield on 10-year Treasury bonds hit a 24-year high after its strongest quarterly gain since 1994, but then reversed course and fell as Fed Vice Chairman Philip Jefferson suggested the central bank could be patient before raising interest rates further. Lower-than-expected August inflation data also significantly reduced the probability of a Fed rate hike in October to 28.2%, down from 68.6% a week earlier.
In the final trading session of the week (October 2nd), all three major indices rose simultaneously, after weaker-than-expected employment data dampened expectations of a Fed interest rate hike at this month's policy meeting. The Dow Jones index rose 250.40 points, or 0.49%, to 51,176.96 points. The S&P 500 index rose 56.27 points, or 0.73%, to 7,722.72 points. The Nasdaq Composite index rose 319.27 points, or 1.19%, to 27,190.86 points.
The US Department of Labor reported that non- farm jobs increased by only 29,000 in September, far below economists' forecasts of 90,000, while figures for the previous two months were also sharply revised downwards. The unemployment rate rose slightly to 4.2%. According to CME's FedWatch tool, the probability of the Fed raising interest rates by at least 0.25 percentage points at its late October meeting fell to 22.7%, from 24.4% in the previous session and 64.2% a week earlier.
Robert Bernstone, head of trading at SummitTX Capital, a multi-strategy hedge fund in New York, believes the jobs data is a fairly positive sign, indicating the economy isn't overheating. However, he notes that concerns about economic growth and inflation remain, so a cautiously optimistic sentiment is still prevalent.
Expectations that the Fed is less likely to raise interest rates boosted interest rate-sensitive stocks, with the S&P 500 real estate index rising 0.4% and the Russell 2000 small-cap index gaining 0.9%, its strongest gain in a month. Mega-cap stocks also led the gains, with Nvidia shares rising 1.3% and Tesla shares rising 4.7%, making consumer discretionary the best-performing sector among the 11 major sectors of the S&P 500, with a 1.4% increase.
Despite a rebound in the US stock market at the end of the week, both the Dow Jones and S&P 500 indices recorded their fourth weekly decline in the last five weeks, while the Nasdaq had its fifth weekly gain in the past six weeks.
Recent economic data showing robust economic activity, but slower-than-expected price increases, coupled with warnings from some senior Fed officials against rushing to raise interest rates further, have led investors this week to lower expectations about the likelihood of a Fed rate hike in October.
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