Stocks rose sharply, especially stocks that are highly levered to economic growth. Employment data was exceptionally strong and growth stocks were also in favor again.
The S&P 500 rose 1.4%, with the tech-heavy Nasdaq up 1.5%, but all sectors were contributing to gains on all indices. The 10-Year Treasury yield shot up to 0.70% from 0.65%. Inflation expectations have been rising incrementally of late, as the real yield on the 10-Year is above negative 0.9%, compared to below -1% earlier this year.
The ADP jobs report smoked expectations, with a September reading of 749,000 jobs added against economists estimates of 600,000. Even with questions lingering over whether the House’s proposed $2.2 trillion stimulus bill will be passed, consumer confidence was strong in September and businesses were adding employees, keeping the V-shaped economic and earnings recovery alive.
All large cap cyclical sectors were up meaningfully, with oil, banking, manufacturing and consumer discretionary all up between 0.5% and 1.7% by noon.
Jobless claims earlier this year looked bleak and consumer confidence readings in August were bleak, painting a mixed picture on the speed of the recovery, but the magnitude of the jobs beat, coupled with a fiscal stimulus bill moving along, was encouraging to investors.
In tech, semiconductors lagged, but still rose. The iShares PHLX Semiconductor ETF (SOXX) – Get Report rose 0.88%. Micron (MU) – Get Report wiped the floor clean on quarterly revenue earnings, but its current quarter revenue guidance of $5.2 billion was light compared to analysts’ hopes for $5.27 billion.
Earnings per share was guided at 47 cents against estimates of 66 cents. Analyst not that Huawei revenue — 10% of Micron’s total — and slowing enterprise spend in cyclical customers like energy and hospitality ones are weighing on the near-term outlook. Still, management