The stock market kicked off the third quarter with a bang, with the S&P 500 and Dow Jones Industrial Average hitting record highs. This bullish sentiment was largely driven by a wave of strong earnings reports, offsetting concerns about last month’s unexpected surge in inflation. Financial giants like JPMorgan Chase, Wells Fargo, Bank of New York Mellon, and BlackRock all exceeded analyst expectations, propelling the sector to new heights.
However, not all companies were celebrating. Tesla Inc. faced investor disappointment after its much-anticipated “We, Robot” event fell short of expectations. While the company showcased its CyberCab and Optimus robot, details about commercialization and timelines were lacking, leaving analysts and investors wanting more. Critics labelled the event more fanfare than substance. This lack of clarity sparked mixed reactions, raising concerns about Tesla’s ability to deliver on its ambitious autonomous vehicle promises. Consequently, Tesla’s stock price plummeted on Friday.
Adding to the market’s complexity, economic data released this week painted a mixed picture. Inflation reports for both consumers and producers came in higher than anticipated, while jobless claims saw the sharpest rise in over a year. Despite the inflation uptick, interest rate expectations remained largely unchanged, with most traders and economists anticipating a rate cut in November. The unemployment spike was attributed to temporary factors, such as Michigan auto layoffs and Hurricane Helene.
On a global scale, Chinese stocks experienced their worst weekly performance of the year due to the absence of anticipated stimulus measures from Chinese authorities. This lack of action dampened investor sentiment, despite a strong rally in recent weeks.
Meanwhile, the housing market continues to face headwinds as mortgage rates saw a sharp reversal last week, jumping to 6.36%. This led to a 5.1% drop in homebuyer applications. While the housing market awaits further rate cuts, rising Treasury yields, driven by a resilient labor market, present significant challenges to mortgage rate relief in the near term.
In the tech world, Google parent company Alphabet is challenging the Department of Justice’s efforts to break up its search dominance. Google argues that the proposed antitrust remedies are radical and could dismantle its core business, negatively impacting innovation and consumer choice.
