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Turnaround! Stocks stage massive swing

Turnaround! Stocks stage massive swing



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Turnaround! Stocks stage massive swing

Disappointing jobs data raises fresh fears about a slowdown in the U.S. economy.

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Wall Street is coming off its worst quarter in four years, so it’s probably not much of a surprise that the IPO market is too. David Craig with America’s Markets.

Stocks on Wall Street have staged a powerful comeback after plunging at the open Friday as investors reacted to a weaker-than-expected September jobs report.

The news, which raised fresh fears about a slowdown in the U.S. economy amid a global slump and fresh questions about U.S. interest rate policy, initially sent the Dow down 258 points, or 1.5%.

But at the close, the Dow was up 1.2%, a 200-point gain for the day the day and a 458-point reversal from the low that CNBC said was the biggest such swing in four years.

The Standard & Poor’s 500 index did even better for the day, closing up 1.4%, but Nasdaq composite index was the standout with its 1.7% gain. Both of the other benchmarks started the day deep in the red, as well.

Investors appear to be shrugging off the weak jobs report, instead focusing on the positives, such as the positive impact of a weakening dollar today on business and earnings of U.S. multinationals. Wall Street may also be reacting to what it perceives as lower odds of an interest rate hike from the Federal Reserve this year. Today’s weak start and rebound rally marks the second straight day U.S. stocks have bounced back from steep drops, another factor that could be giving investors some confidence that the market is not ready to break sharply lower right now, despite its recent drop into correction territory for the first time in four years. A correction is defined as a drop of 10% from a previous high.

The economy created just 142,000 jobs in September, well below the 200,000 jobs economists had forecast. The unemployment rate held steady at 5.1%. Adding to the negative tone, the government also revised lower August jobs to 136,000 from 173,000 and July to 223,000 from 245,000.

The weak September jobs report and downward revisions to the prior two months raised fresh fears about the health of the U.S. economy, which appears to have weakened amid a slowing global economy and recent market turbulence. The weak jobs data also could push off the Federal Reserve’s first rate hike to next year, according to Fed funds rate futures trading and initial reactions from Wall Street pros after the jobs data was released.

The “bad data could push hikes further out,” Bespoke Investment Group told clients in a report.

Weak employment data drove a big rally in U.S. government bonds, which is considered a haven in tough times. The yield on the 10-year Treasury note dropped to 1.92%, its first trip below 2% since August 24, the day the Dow nearly plunged nearly 1,100 points and its lowest yield since a 1.92% yield on April 27.

“It was an ugly report,” JJ Kinahan, chief market strategist at TD Ameritrade, told USA TODAY.

A weakening job market creates all sorts of new worries for investors that are also grappling with the stock market’s first 10%-plus price correction in four years, Kinahan adds.

Weak jobs data “paints an ugly piccture for GDP (or U.S. economic growth) and (third-quarter) earnings season” which unofficially kicks off next week,” Kinahan says.

The big worry is that the U.S. economy may be feeling the negative effect of the slowdown in China and emerging markets.

“We were already nervous for earnings season due to the Asian slowdown, now the jobs report is showing a significant slowdown in the U.S. as well,” Kinahan said, adding that it also creates “a big question mark for the Fed” and all but ensures a continuation of the bumpy ride in financial markets.

Investors are keenly examining today’s latest read on the health of the U.S. employment market, as it will influence the Federal Reserve’s thinking on whether to hike interest rates for the first time in nearly a decade at either their October or December meeting. A move this year is now less likely, according to Paul Ashworth, chief U.S. economist at Capital Economics. The Fed, led by chair Janet Yellen, opted not to boost rates at its September meeting, citing global economic weakness, market turbulence and still low readings on inflation as reasons not to move.

The stock market, of course, is coming off its worst quarter in four years and a mixed start to the fourth quarter yesterday, when the Dow, which was down as much as 211 points, finished nearly 13 points lower. Pushing stocks down last quarter was the uncertainty surrounding the Fed’s rate-hike timetable, as well as the fallout from slowing economic growth in China and the resulting selloff in commodities and emerging markets.

Sam Stovall, chief U.S. equity strategist at S&P Capital IQ, told USA TODAY that investors can expect more tough times in the stock market.

“I think the weaker-than-projected jobs report, along with the downward revision to August data, adds credibility (to the idea) that the market decline has further to go in depth and duration, Stovall said.

In today’s trade around the globe, European markets gave up early gains after the U.S. employment report. London’s FTSE 100 was up 0.3% and Germany’s DAX index turned lower, dropping 0.5%. The CAC 40 in Paris was down 0.5%.

Shares finished flat in Japan, while stocks that trade on Hong Kong’s Hang Seng index jumped 3.2%.

Oct. 2 — U.S. payrolls expanded less than expected in September, adding 142,000 jobs while the jobless rate held steady at 5.1 percent. The August jobs numbers were also revised down to 136,000. Bloomberg

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