Stock rally for two days straight led by tech on increasing stimulus betsStocks continue to fall on a weekly basis, pressured by trade and string of negative economic data

Expect increased volatility during the first full trading week of October along with equity declines. A string of negative economic data and falling Treasury yields could pressure what might turn out to be a technical top for the S&P 500.

Though the S&P 500, Dow Jones, NASDAQ and Russell 2000 all gained as last week’s trading activity came to a close, on a weekly basis, stocks still extended a selloff. As well, for a third consecutive week, cyclical sectors led the selloff, while yields slumped over the same period.

Back-to-back negative economic reports, including from ISM, unnerved traders, resurrecting the narrative that the U.S. was set to join the global economic slowdown. Red flags were raised in particular when the ISM manufacturing PMI contracted for a second straight month. While the services index dropped as well, it remained in positive territory.

However, the case for continued growth was made on Friday when the monthly nonfarm payrolls report was released. Though job creation came in below expectations and average hourly earnings slipped, the U.S. unemployment rate fell to 3.5%, its lowest since 1969. This, more than anything else is what the Fed looks for, as a spur continued consumer spending growth, and what the country’s GDP relies on.

Nevertheless, speculation still runs high for another interest rate cut this month, even as the jobs release calmed growth fears, creating a dissonance in the market narrative. Lately, the market has been selling off on positive economic data, which is seen to reduce chances of additional Fed cuts, while rallying on negative data releases, viewed as increasing the outlook for lower rates.

Oil rebounded on Thursday, bouncing off the lows since June, closing higher on Friday, toward $53.

Week Ahead

All times listed are EDT

Tuesday

8:30: U.S. – PPI: expected to remain flat at 0.1% MoM.

Wednesday

10:30: U.S. – Crude Oil Inventories: likely to plunge to 1.567M from 3.100M.

14:00: U.S. – FOMC Meeting Minutes will be released, providing greater clarity on the votes for the Fed’s most recent interest rate decision.

Thursday

4:30: UK – Manufacturing Production: predicted to fall to -0.1% from 0.3%.

8:30: U.S. – Core CPI: probably edged down to 0.2% from 0.3% during September; the headline rate is expected to remain flat at 0.1%.

Friday

8:30: Canada – Employment Change

Canada Employment Change

Upcoming Release:Oct 11, 2019Forecast:7.5KPrevious:81.1K: seen to plunge to 7.5K from 81K in September