Weekly Market Mornings (October 06) War Fears Drive Oil Prices Surge 9%

Last Week’s Reports

Economic Reports

In September, the  ISM Manufacturing PMI stayed at 47.2%, showing continued contraction for the sixth month. New Orders and Production indices improved slightly, but the Employment Index fell to 43.9, indicating job weakness. The Prices Paid Index dropped to 48.3, easing input costs, while Supplier Deliveries rose to 52.2, showing supply chain improvement.

The ISM Services PMI increased to 54.9%, marking the third month of expansion. Business Activity and New Orders indices showed strong growth, but the Employment Index fell to 48.1, indicating job contraction. The Prices Index rose to 59.4%, reflecting rising input costs, despite overall robust sector performance.

Powell’s Speech

Federal Reserve Chair Jerome Powell spoke last week at the National Association for Business Economics (NABE) Annual Meeting in Nashville. 

Powell emphasized the solid state of the U.S. economy, highlighting steady growth and low unemployment. He noted that while the labor market remains strong, it is cooling, and inflation has eased but is still above the Fed’s 2% target.

Powell expressed confidence in a sustainable path to 2% inflation, with core service inflation nearing pre-pandemic levels and housing inflation declining slowly. He also mentioned that the Fed is prepared to cut interest rates further, if necessary, but will be guided by economic data.

Powell addressed global economic uncertainties, including geopolitical tensions and trade issues, which could impact the U.S. economy. He reiterated the Fed’s commitment to using all available tools to support the economy, ensure maximum employment, and maintain price stability.

Additionally, he encouraged bankers to work with customers affected by hurricanes.
Read Powell’s full speech report.

Jobs Report

Significant jobs reports have been released last week. Here are some key highlights of these reports:

• The September JOLTS report revealed 8.03 million job openings, providing insight into labor demand and turnover. Additionally, 3.1 million job quits were recorded, indicating a sign of worker confidence in the labor market.
• The ADP National Employment Report for September indicated that the U.S. private sector added 143,000 jobs. This marked a rebound in job creation after a five-month slowdown.
• In the week ending September 28, initial unemployment claims in the U.S. rose to 225,000, exceeding market expectations and marking a three-week high. This suggests a softening labor market and supports predictions of upcoming Federal Reserve rate cuts. Meanwhile, continuing jobless claims slightly decreased to 1.826 million for the week ending September 21.
• In September, the U.S. economy added 254,000 Non-Farm Payroll jobs, far exceeding the market expectation, indicating a robust labor market. However, manufacturing payrolls decreased by 7,000, slightly more than the expected 5,000 drop.
• Average hourly earnings for all employees on private nonfarm payrolls increased by 0.4% month-over-month to $35.36, surpassing the forecast of a 0.3% rise. Year-over-year, earnings increased by 4%, the highest in four months, beating the expected 3.8% gain.
• In September, the U.S. unemployment rate fell to 4.1% from 4.2% the previous month, marking the lowest rate in three months and surprising market expectations, which had predicted it would remain unchanged.

Discover the full jobs report here.

Earning Reports

Nike

NIKE (NKE) reported a challenging first quarter for fiscal 2025, with revenues of $11.1 billion, down 10% year-over-year due to declines across all geographies. 

The company’s Direct revenues fell 13%, driven by a significant 20% drop in NIKE Brand Digital, though this was slightly offset by a 1% increase in NIKE-owned stores. Wholesale revenues also decreased by 8%. 

Despite these declines, gross margin improved to 45.4% due to lower product, warehousing, and logistics costs, along with strategic pricing actions from the previous year. 

Net income dropped 28% to $1.1 billion, with diluted earnings per share down 26% to $0.70. The company continued its strong track record of shareholder returns, distributing $1.8 billion through dividends and share repurchases.

The company has cut its full-year 2025 guidance, anticipating a potential 10% revenue drop next quarter. 

The upcoming CEO transition in October 2024 adds further uncertainty. However, NIKE remains focused on cost control, inventory management, and capital returns to navigate these challenges. 

Nike’s earnings report led to a 6% drop in NIKE’s stock during after-hours trading, reflecting market concerns over the revenue decline and the withdrawal of full-year guidance.

Indices

Indices’ Weekly Performance:

The job reports released in early October significantly impacted the stock market. The S&P 500 edged up 0.2%, while the Dow gained 0.1%. However, the Nasdaq saw a slight up of 0.1%, and the Russell 2000 fell by 0.5%, reflecting some softness in small-cap stocks.

Strong job growth of non-farm payrolls and a drop in the unemployment rate, boosted investor confidence, leading to a market rally on Friday. Also, wage growth indicated rising consumer spending power, positively affecting the economy and stock prices. 

The robust labor market data reinforced expectations that the Federal Reserve might delay further rate cuts, initially causing some volatility but ultimately supporting a bullish sentiment. 

The S&P 500 index has been in a relatively strong upward trend over the last year, with a 35% increase from the same period in 2023. 

Technically, immediate resistance is near the 5,753 level, while the support zone is around the 5,700 mark. A break above 5,767 could trigger further upside momentum, while a fall below 5,700 might indicate a correction.

Overall, the S&P 500 shows bullish characteristics, but short-term pullbacks could be expected due to overbought conditions.

Stocks

Stock Market Sector’s Weekly Performance:

Source: Finviz

Sectors sensitive to economic growth, such as technology and consumer discretionary, saw significant gains, reflecting optimism about the U.S. economy’s strength.

Several sectors underperformed, with Materials down by 1.88%, Real Estate falling 1.55%, and Consumer Staples declining by 1.36%. 

In contrast, Energy saw a strong 6% gain, driven by surging oil prices. Other bright spots included Communication Services, which climbed 1.83% and financials, which rose 0.72%.

Last week, the U.S. stock market’s energy sector surged, with the S&P 500 Energy Index rising by 6.63%. This significant performance was driven by surging oil prices, which spiked by over 9% during the week. A combination of geopolitical tensions, especially in the Middle East involving Israel and Iran, and supply concerns played a major role in this rally. Investors sought safety in energy stocks amid the escalating crisis, as oil is seen as a critical commodity during such disruptions.

Stock Market Weekly Performance:

Source: Finviz

Top Gainers

For the previous week, some of the top large and mega-cap gainers saw strong performance driven by various factors:

• Futu Holdings (FUTU): Gained over 49%. The fintech company benefited from bullish sentiment around Chinese tech stocks and optimistic views on its upcoming earnings report. Investors and traders showed strong confidence in its online brokerage and wealth management business model​.
• Daqo New Energy (DQ): Rose about 25%. This solar energy company experienced gains due to increasing global demand for solar power, which is growing alongside heightened attention to sustainable energy solutions. The company’s focus on producing polysilicon for the solar industry positioned it well amid green energy trends​.
• Veritone Inc (VERI): Increased by 8%. This AI-focused company’s stock surged as artificial intelligence and machine learning technologies remain hot sectors. Veritone’s latest advancements in AI applications, such as generative AI, attracted investor interest​.
• Palantir Technologies (PLTR) surged by 8.61% during the week, benefiting from and growing demand for its AI-powered platforms, which are increasingly being adopted by both commercial enterprises and government contracts​

Meta

Meta Platforms (META) experienced a gain of about 5%. This rise was fueled by continued enthusiasm for its investment in artificial intelligence, particularly within its ad-tech products, which are starting to yield positive results. The company’s Metaverse initiatives have also been gaining traction with new developments.

Meta Platforms introduced updated versions of its Ray Ban-styled smart eyeglasses at its Meta Connect event, featuring real-time language translations and additional audio and video content.

Also, Meta launched Friday a new artificial intelligence tool called Movie Gen that can generate videos based on a text prompt. 

Meta is showing strong bullish momentum. The stock has recently reached an all-time high of $596.85, reflecting a significant rise of 95.63% over the past year. The daily technical analysis indicators suggest a “Strong Buy” rating due to favorable trends across multiple indicators like moving averages and oscillators. META has a beta of 0.99, indicating moderate volatility.

However, you should remain cautious of possible reversals or corrections, as these levels might trigger profit-taking. Keep an eye on key support levels in case of a pullback.

Commodity

Weekly Performance of Gold, Silver, WTI and Brent Oil:

Source: Finviz

WTI and Brent crude oil  prices surged, rising 9%, marking the largest weekly gains since early 2023. This increase was driven by escalating geopolitical tensions in the Middle East, particularly Iran’s missile attack on Israel, and concerns about supply disruptions and low global oil inventories.

Additionally, OPEC+ production cuts and strong demand from Asia further tightened supply, boosting prices. 

In the technical landscape, WTI shows strong bullish momentum, facing resistance around $75 and support near $70 per barrel. Short-term prices are expected to remain volatile due to geopolitical news and market sentiment.

Forex

Weekly Performance of Major Foreign Exchange Pairs:

EUR/USD fell from around 1.12 to near 1.098 last week, driven by economic data and monetary policy expectations. The European Central Bank’s dovish stance, with potential rate cuts due to cooling inflation (below 2%). This contrasts with the U.S. economic data, including strong ISM and labor market reports.

In addition, weak PMI data from the Eurozone, especially in manufacturing, and falling inflation further weakened the Euro, as markets anticipated more ECB rate cuts.

USD/JPY rose as the Bank of Japan maintained its dovish stance. Governor Ueda reiterated that the BoJ won’t raise rates without clear signs of wage growth and sustained inflation. This widened the interest rate differential between the U.S. and Japan, further weakening the yen​.

Meanwhile, robust U.S. employment data supported the dollar. Higher employment typically reinforces USD gains​.

USD/JPY surged above key resistance at 147.24, indicating strong upward momentum. If it breaks through the 148.00-149.40 range, the next resistance level could be 150.80​.

The RSI indicates bullish momentum. A failure to hold above 147.24, however, could see the pair retrace to support near 145.00​.

Crypto

Crypto Market Weekly Performance:

Source: quantifycrypto

The cryptocurrency market saw notable movements. Bitcoin experienced a 5% drop, while Ethereum followed with an 8% fall. 

BTC is experiencing a mix of market signals. The general sentiment is bearish, with 54% of technical indicators signaling a potential downward trend. The key resistance levels to watch are around $65,000, and $66,941, while support level is at $60,000. This means Bitcoin is at risk of declining further if it breaks through this support level, although a rebound could occur if it manages to hold.

Next Week’s Outlook

Economic Events 

Throughout the week, investors will hear from various Federal Reserve officials, including Governor Michelle Bowman, who opposed the recent 50 basis point rate cut. On Wednesday, the Fed will release the minutes from its September meeting, which, along with the officials’ commentary, could shed light on the Fed’s next steps in the ongoing rate-cutting cycle.

Additionally, the market will receive new economic data, including the September Consumer Price Index (CPI) and Producer Price Index (PPI). Experts anticipate that both reports will indicate a decline in inflation.

Earning Events 

PepsiCo (PEP) earnings reports coming this week on Tuesday.

Also, bank earnings take center stage, with JPMorgan Chase (JPM), Wells Fargo (WFC), BlackRock (BLK), and BNY Mellon (BK) reporting quarterly results.