Dow closes 400 points higher, but snaps four-week win streak on rising rate fears

Stocks rose on Friday, but ultimately capped off the week with losses.

The Dow Jones Industrial Average gained 401.97 points, or 1.26%, to close at 32,403.22. The S&P 500 advanced 1.36% to settle at 3,770.55, and the Nasdaq Composite rose 1.28% to finish at 10,475.25.

All the major averages closed lower for the week. The Dow shed 1.4% after four consecutive weeks of gains. The S&P and Nasdaq fell 3.35% and 5.65%, respectively, to break two-week winning streaks.

— Samantha Subin

A “massive bifurcation” is underway between mega-cap technology stocks and the rest of the market, says Andrew Slimmon, senior portfolio manager at Morgan Stanley Investment Management.

Many popular technology stocks have sold off sharply in recent days on disappointing earnings results and forecasts. Despite the downdraft in their valuations, Slimmon says to steer clear of many of these names as earnings need to come down. Most are also trading at a premium to the rest of the market.

Instead, Slimmon points investors to stocks he’s confident will continue to make their numbers even in a slowing economy. These sectors have also cut estimates and trade at low-teen or high-single-digit multiples.

One area he views positively is home-building stocks and home retailers that have been adversely affected by mortgage rates, but are expected to recover from current levels.

“Those groups really started to break down in the fourth quarter last year in anticipation that rates would be moving up,” he said. “I think, ultimately, the economy’s going to slow, and it won’t be great for the housing market, but mortgage rates could start to come back down.”

— Samantha Subin

Morgan Stanley is staying “fundamentally bearish,” saying leading indicators show further deterioration ahead.

The firm recommended being overweight on utilities, health care and real estate. Meanwhile, it listed discretionary and hardware as sectors investors should be underweight on.

But the firm did note a Fed pivot could come “sooner rather than later” and that there is the potential for a further rally to between 4,000 and 4,150 points before what it called “the next leg of this bear market,” which would come in between 3,000 and 3,200 points.

Corporate earnings were being watched carefully, as the firm said the “weak macro” environment has been a main talking point among companies. It also noted average valuation is trending lower as cuts to companies’ earnings per share begin.

However, the firm said multiple major indexes, including the S&P 500, saw rebounds in October.

— Alex Harring

It finally happened.

After falling for several months, analysts’ expected growth rate for fourth quarter S&P 500 earnings has turned negative. Profits in the Q4 are now projected to shrink by 1% — compared with estimated growth of 9.1% back on June 30 and 3.9% as recently as Sept. 30, according to FactSet senior earnings analyst John Butters in a report released late Friday.

One week ago, on Oct. 28, fourth quarter profits were still estimated to expand, albeit at a scant 0.2%.

Third quarter profits are currently running at a 2.2% growth rate. If they remain higher than last year, that would mark the eighth consecutive quarter of year-over-year, S&P 500 earnings growth.

— Scott Schnipper

Stocks rose as the final hour of trading kicked off Friday.

The Dow Jones Industrial Average last traded 221 points higher, or 0.7%. The S&P 500 advanced 0.8%, and Nasdaq Composite rose 0.6%.

— Samantha Subin

The unemployment rate for Black men fell to 5.3% in October from 5.8% a month earlier on a seasonally adjusted basis. But it wasn’t because the group was necessarily getting ahead in the labor market.

The downward motion in unemployment for Black men is likely due to the labor force participation rate, which dipped slightly to 67.2% in October, just below the previous month’s reading of 68%.

In addition, the employment-to-population ratio for Black men fell to 63.6% from 64.1% in September, which could indicate that workers have stopped looking for jobs, sending unemployment lower.

Overall, unemployment for Black and Hispanic workers is still higher than white ones.

—Carmen Reinicke

Truist is bailing on technology stocks amid the latest market shakeup, downgrading the sector to underweight from neutral.

“The sector recently broke below an important technical price level and still trades at a significant market premium, despite earnings momentum at multi-year lows,” Truist said in a note to clients. “Importantly, we are finding better opportunities in other areas of the market, such as energy, industrials, health care, and staples.”

Technology shares continue to trade expensive at a 25% premium to the S&P 500, Truist said. That’s compared to an average 10-year premium of 6%. The sector, meanwhile, fails to offer the strong earnings momentum investors in the past have willingly paid a premium for.

The firm recommends the energy sector and defensive areas like consumer staples and healthcare —which tend to perform well in a weakening economic environment.

— Samantha Subin

Friday’s October jobs report may indicate earlier hikes from the Fed beginning to work their way through the system, said Charlie Ripley, senior investment strategist at Allianz Investment Management.

“Today’s payroll number was the lowest figure year-to-date and while the pace of the slowdown has not been materially evident, we could be witnessing the beginning effects of policy tightening trickle into the economy,” he said. “The bottom line is that despite the employment data not showing a swift slowdown, the data appears to be moving in the right direction, but at a very slow pace.”

— Samantha Subin

• Block — The mobile payments company jumped 10% on better-than-expected in its third-quarter results. Block earned 42 cents per share on revenue of $4.52 billion. Analysts polled by Refinitiv expected 23 cents earnings per share on revenue of $4.49 billion.
• Atlassian — Shares of Atlassian dropped 33.4% after the collaboration software maker reported lower earnings than expected and issued a disappointing outlook.
• DraftKings — DraftKings fell nearly 28% after warning a prolonged economic downturn could impact spending by its customers.

For more movers, check out the full story.

— Michelle Fox

The SPDR S&P Metals & Mining ETF soared as much as 8.8% Friday, briefly putting it on pace for its best day since March, 2020 at the depths of the short-lived Covid-19 bear market (XME climbed 12.7% one day that month.)
 
Among the individual stocks that are leading the XME today are TimkenSteel, Peabody Energy, Alcoa, MP Materials, Ryerson, Century Aluminum and Freeport-McMoRan, all up more than 10% at one point before pulling back.

The far larger iShares MSCI Global Metals & Mining Producers ETF ($19.4 billion market cap vs $820 million for XME) at one point was higher by as much as 9.7% Friday.

December copper contracts reached $3.6665, the highest level since Sept. 13, bringing the week’s gain to 6.75% (best week since March 2022), and leaving copper higher on the year.

London Metal Exchange aluminum contracts climbed to $2,337.5 per metric tonne and were up more than 5% week-to-date.

— Scott Schnipper, Gina Francolla

New 52-week lows in the S&P 500 (20) outnumbered new highs (18) early Friday, but almost four out of five of the new highs set all-time records.

One of the new lows (Microsoft) is in the Dow Jones Industrial Average, as is one of the new highs (Chevron).

New 52-week lows:

• Lumen Technologies (LUMN), lowest seen since 1988
• Meta Platforms (META) lowest since 2015
• Paramount (PARA), lowest since 2020
• Warner Bros. Discovery (WBD), lowest since 2009
• Amazon.com (AMZN), lowest 2020
• Assurant (AIZ), lowest since 2020
• Lincoln National (LNC), lowest 2020
• SVB Financial (SIVB), lowest since 2020
• Baxter (BAX), lowest since 2017
• Catalent (CTLT), lowest since 2020
• DaVita Inc. (DVA), lowest since 2020
• Generac (GNRC), lowest since 2020
• F5 Networks (FFIV), lowest since 2020
• Microsoft (MSFT), lowest since 2021
• Tyler Technologies (TYL), lowest since 2020
• Zebra Technologies (ZBRA), lowest since 2020
• AvalonBay Communities (AVB), lowest since 2021
• Equity Residential (EQR), lowest since 2021
• Essex Property Trust (ESS), lowest since 2020
• Public Storage (PSA), lowest since 2021

New 52-week highs:

• Monster Beverage (MNST), highest ever, going back to 1992 Nasdaq listing
• ConocoPhillips (COP), all-time high back to merger of Conoco and Phillips Petroleum in 2002
• Chevron (CVX), all-time high back to merger with Texaco in 2000
• EOG Resources (EOG), trading at all-time high back to start of trading in 1989
• Diamondback Energy (FANG), all-time high back to 2012 IPO
• Marathon Petroleum (MPC), all-time high back to spinoff from Marathon Oil in 2011
• SLB (SLB), highest since 2018
• Exxon (XOM), trading at all-time high back to when it was listed on the NYSE in 1920
• Everest RE Group (RE), all-time highs back to 1995 IPO
• Principal Financial (PFG), all-time high back to 2001 IPO
• AmerisourceBergen Corporation (ABC), all-time high back to 1995 IPO
• Cardinal Health (CAH), highest since 2017
• Gilead Sciences (GILD), highest since 2020
• Eli Lilly (LLY), record going back to initial trading in 1952 
• McKesson (MCK), all-time high back to 1983
• WW Grainger (GWW), all-time high back start of trading in 1967
• PACCAR (PCAR), highest since 2021
• Quanta Services (PWR), all-time high back to 1998 IPO

 — Scott Schnipper, Christopher Hayes

Stocks rose modestly during midday trading, but all the major averages were on track to cap off the week with losses.

The Dow Jones Industrial Average last traded 130 points higher, or 0.4%, after rising more 610 points earlier in the session. The S&P 500 added 0.3% and Nasdaq Composite slipped 0.1%.

At one point, stocks turned negative, with the Dow falling roughly 52 points, while S&P and Nasdaq were down as much as 0.28% and 0.6%, respectively.

— Samantha Subin

Morgan Stanley’s Adam Jonas pulled the firm’s ratings and price target on Carvana, citing deterioration in the used car market and a volatile funding environment.

Previously, Morgan Stanley had an equal weight rating on Carvana’s shares and a price target of $68.

Jonas pointed to Carvana’s third-quarter results, which “featured falling sales, higher [selling, general and administrative expenses]/unit and a material exhaustion of cash.”

“Secured borrowing capacity may be available, but we believe equity holders also face significant risk of dilution, driving a wide range of outcomes and prompting us to remove rating and target,” he said.

Indeed, Carvana posted a wider-than-expected loss of $2.67 per share. Revenue also came in below expectations at $3.39 billion, compared to estimates of $3.71 billion, according to Refinitiv.

“While the company is continuing to pursue cost cutting actions, we believe a deterioration in the used car market combined with a volatile interest rate/funding environment (bonds trading at 20% yield) add material risk to the outlook, contributing to a wide range of outcomes (positive and negative),” Jonas wrote.

To that effect, he gave a 12-month base case range of $1 to $40. In a bull case, shares could go as high as $70 apiece, but in a bear case, shares could plummet to 10 cents, Jonas said.

Shares of Carvana were down 21% around 11:30 a.m. ET

— Darla Mercado

Rumors and speculation that China could reopen its economy and move away from Covid restrictions spurred rallies in commodities and added to positive sentiment in stock markets globally.

Brent rose 3.4%, while West Texas Intermediate oil futures jumped 4%. Copper futures were up 7.2% and platinum jumped 3.8%. European stocks ended Friday’s session sharply higher, with Germany’s DAX up 2.9%.

The dollar index fell sharply, off 1.5%. The greenback lost ground against a rising Chinese yuan, a surging euro and a host of other currencies.

The Chinese government has made no announcement about a policy change related to Covid. But Chinese stocks rallied Friday on reports of a closed door speech by a chief scientist at the Chinese Center for Disease Control and Prevention that suggested a transition away from Covid policy could happen soon. Chinese financial media Cailian Press reported that there would be a press conference at the National Health Commission building on Saturday.

Stock strategists said the expectation of news from China over the weekend added to positive sentiment around U.S. stocks Friday. The S&P 500 was higher after four days of selling. The materials sector the top performer, up 3.8%.

China’s Shaghai market was up 2.4% Friday and the Hong Kong Hang Seng Index was up 5.4%.

“If the China stuff is true that’s great news for the global economy, but it’s negative for the inflation story because it would lead to another rise in commodity prices,” said Peter Boockvar, chief investment officer at Bleakley Global Advisors.

The SPDR S&P Metals and Mining ETF was up 7.4% and the Energy Select Sector SPDR rose 1.7%.

–Patti Domm

Jobs growth came in better than expected in October thanks in part to strong gains in manufacturing and health care sectors.

Manufacturing jobs increased by 32,000 last month, boosted by gains in the durable goods industry, according to the Labor Department. That advance brought the sector’s average monthly job gain for the year to 37,000, compared with 30,000 per month in 2021.

Some market participants found the increase notable given the sharp slowdown in goods spending in the economy this year, as consumers shift more of their spending to services.

“The manufacturing gain of 32,000 suggest the economy is far from slowing in a meaningful way,” TradeStation Group’s David Russell wrote in a Friday note.

The health care and social assistance sector also enjoyed strong gains, adding 71,100 jobs last month. By itself, the health care sector gained 53,000 jobs in October, boosted by growth in ambulatory health care services, as well as nursing and residential care facilities.

Read more on where the jobs are for October 2022.

— Sarah Min

All 11 sectors of the S&P 500 are trading up as the market sees an early rally Friday.

Materials led the way with 4% added, while health care saw the smallest gain at 0.8%.

Here’s where each sector stands:

• Materials (4%)
• Consumer discretionary (3%)
• Energy (1.9%)
• Financials (2.2%)
• Information technology (1.8%)
• Industrials (1.7%)
• Communication services (1.8%)
• Real estate (1.7%)
• Health care (0.8%)
• Utilities (0.9%)

— Alex Harring

Shares of Chinese stocks listed in the U.S. rose on Friday amid hopes that China may ease some of its Covid policies although the government has yet to make a formal announcement.

Shares of U.S.-listed China stocks Pinduoduo, JD.com and Alibaba surged 8.9%, 10% and 6.7%, respectively. Bilibili shares soared 15.5%.

The iShare China Large-Cap ETS rose 6.8%, while KraneShares CSI China Internet ETF added 7.6%.

— Samantha Subin

October’s low unemployment rate may signal that the Federal Reserve needs to pivot toward fighting other areas of the economy to cool inflation, Nela Richardson, ADP’s chief economist, told CNBC’s “Squawk Box” on Friday.

“We still have a labor market that is incredibly tight with an unemployment rate below 4%,” she said. “So, for the Fed to cool off this economy, the biggest hurdle right now is the labor market.”

The Fed may need to pivot to the housing market or other financial conditions to fight inflation as the job market shows continued signs of resilience, she said.

— Samantha Subin

Despite a rise in hourly earnings, October’s jobs report should put a 50 basis point hike in focus come the Federal Reserve’s December meeting, said LPL Financial’s Quincy Krosby.

“The report, overall, helps the equity markets as the unemployment rate, now higher at 3.7% underscores that payroll numbers are shifting lower but not collapsing,” she wrote.

The data also suggests that the labor market remains strong but is “slowing at a margin,” Krosby said.

— Samantha Subin

October’s nonfarm payrolls report suggests more work is ahead for the Federal Reserve, says Rusty Vanneman, chief investment strategist at Orion Advisor Solutions.

 “The October Jobs Report likely wasn’t what the Fed wanted to see,” he wrote. “While the news is good for consumers – the labor market remains strong, and wages are increasing – these numbers don’t suggest inflation is likely to slow at the rate the Fed is looking for.”

He noted that payroll growth was also higher than expected and further suggests that jobs “remain plentiful” and companies continue to hire. Payroll growth was stronger than expected this month and last month’s growth was even revised higher. 

“While the unemployment rate may become part of the political conversation, it is that season, it’s still a strong number and one that’s not likely to rise much soon given there are still two job openings for every unemployed person,” he said.

— Samantha Subin

The total number of workers in the labor force declined slightly in October after gaining some steam during the summer.

The total number of individuals employed stood at 158.6 million in October, down from roughly 158.9 million in September.

The labor force participation rate also declined slightly to 62.2% for the second straight month from 62.3% in September.

— Samantha Subin

Stocks opened higher Friday.

The Dow Jones Industrial Average gained 345 points, or 1.1%. The S&P 500 and Nasdaq Composite advanced 1.4% and 1.6%, respectively.

— Samantha Subin

Traders bet the Federal Reserve will raise interest rates even higher, following the strong payrolls and wage data in the October employment report.

The economy added 261,000 jobs in October, while economists surveyed by Dow Jones expected just 205,000. Average hourly wages grew by 0.4%, versus estimates for a 0.3% increase.

“There’s no obvious sign that the labor market is cooling off. That means the Fed is going to be unhappy…They need to see wages grow at a much slower pace,” said Michael Schumacher of Wells Fargo.

He noted that fed funds futures moved up after the report, pricing an implied end point for the Fed by June of 5.20% from 5.14% late Thursday.

“Higher for longer I think is the theme,” he said.

The 2-year Treasury yield, which reflects Fed policy, temporarily jumped to a high of 4.8% after the report. before falling back.

Fed funds futures for December were pricing in a 35% chance of a 75 basis point hike in December. That was slightly higher than Thursday’s odds, but the market still signals expectations for a 50 basis point hike. The Fed raised its fed funds target rate by 75 basis points on Wednesday, its fourth hike of that size. A basis point equals 0.01 of a percentage point.

— Patti Domm

The U.S. economy added more jobs last month than was expected, according to numbers released Friday by the Bureau of Labor Statistics.

Jobs grew by 261,000 in October, beating a Dow Jones estimate of 205,000.

— Fred Imbert

These are some of the companies moving before the bell Friday:

DraftKings – DraftKings fell 12.5% in premarket trading despite reporting a smaller-than-expected quarterly loss and revenue that topped Wall Street forecasts. The sports betting company also raised its revenue guidance and warned a prolonged economic downturn could impact spending by its customers.

China stocks – Shares of China-based companies that trade in the U.S. rallied in off-hours trading on reports that China would ease its strict Covid-19 protocols. Alibaba (BABA) jumped 9.7%, JD.com (JD) gained 9.3%, Pinduoduo (PDD) added 8.8% and Bilibili (BILI) surged 14.4%.

Starbucks – Starbucks shares rose 4.6% in the premarket after the coffee chain reported better-than-expected profit and revenue for its latest quarter, with sales hitting a record high. Starbucks said its investments in new equipment and higher wages for workers are paying off.

DoorDash – DoorDash stock rallied 11.9% in premarket trading on the strength of record orders and better-than-expected revenue, although its quarterly loss was wider than expected. Customers continue to spend on food delivery even in the face of higher prices.

Carvana – Carvana slid 7.4% in premarket trading after the used-car retailer reported worse-than-expected quarterly results. Increased car prices and higher interest rates were key factors in denting demand.

Check out the full list of stocks making the biggest moves here.

— Peter Schacknow, Samantha Subin

Shares of both Twilio and Atlassian plummeted more than 25% before the bell Friday after the software companies offered weak guidance in their quarterly reports.

Twilio surpassed analysts’ expectations on the top and bottom lines, posting a smaller-than-expected loss for the quarter. For the fourth quarter, Twilio said it expects revenue of $995 million to $1.005 billion. Analysts surveyed by Refinitiv had anticipated a forecast of $1.07 billion in revenue.

Atlassian’s stock slid on a slight earnings miss and weak outlook. For the fiscal second quarter, Atlassian sees $835 million to $855 million in revenue, below consensus expectations of $879.2 million, according to Refinitiv.

— Samantha Subin, Jordan Novet

PayPal‘s stock slumped more than 6% in premarket trading Friday after revenue expectations for the fourth quarter fell short of Wall Street’s expectations.

The company surpassed third-quarter expectations on the top and bottom lines, but said revenues for the current period would come in at $7.38 billion. That’s behind the $7.74 billion analysts surveyed by Refinitiv had expected.

PayPal, meanwhile, upped its earnings per share guidance for the full year, citing “ongoing productivity initiatives,” and said it anticipates the addition of 8 to 10 million new net active users.

— Samantha Subin, Lauren Feiner

Shares of the mobile payments company climbed 14% before the bell Friday after posting a strong earnings beat for the recent quarter.

Block shared earnings of 42 cents a share, surpassing EPS estimates of 23 cents. The company also posted a slight revenue beat.

Block’s Cash App business reported a 51% advance in gross profit year over year.

— Samantha Subin, Kif Leswing

BTIG said shares of WeWork could rally more than 190% from current levels as companies grapple with uncertainty over remote, hybrid or in-person work, which makes it difficult to set a long-term corporate real estate strategy.

“We are incrementally more convicted that this uncertainty could persist for years, not quarters, and that employers will continue to prioritize flexibility as they seek to determine when, where, and how their employees will utilize office space going forward,” the firm said.

CNBC Pro subscribers can read more here.

— Carmen Reinicke

Shares of toymaker Funko dropped more than 40% in the premarket after the company reported a much weaker-than-expected profit for the third quarter and slashed its full-year earnings outlook.

The results also led JPMorgan to downgrade the stock to neutral from overweight, noting: “We believe valuation will be handcuffed until there is more visibility on the earnings outlook (especially a small cap company).”

— Carmen Reinicke

China tech heavyweights listed in Hong Kong extended gains in afternoon trade, as the broader index added more than 6%.

Tech giants Alibaba and JD.com soared 14% and 13%, respectively. Tencent added 9.85%, and Meituan gained 8.34%.

The surge come on the heels of speculation on when China could ease its Covid restrictions.

— Lee Ying Shan

Oil prices gained on the heels of a slip in the U.S. dollar index and speculation of China easing its Covid restrictions.

Brent crude futures added 2%, to stand at $96.56 per barrel, while U.S. West Texas Intermediate rose 2.21% to $90.12 per barrel.

— Lee Ying Shan

Analysts at Morgan Stanley think one global biotech company’s stock could soar 398% in the next year.

The company’s latest regenerative medicine has completed phase 2 trials in Japan and U.S. and is awaiting final approval.

Analysts believe it will be a “major contribution to longer-term earnings” once approved.

CNBC Pro subscribers can read more here.

— Ganesh Rao

Shares of Block surged 13.6% in extended trading Thursday after the mobile payments company surpassed profit and sales expectations. Block reported earnings of 42 cents per share on revenue of $4.52 billion. Analysts polled by Refinitiv were forecasting earnings of 23 cents per share on revenue of $4.49 billion.

In contrast, PayPal shares dropped more than 8% after the company issued a fourth-quarter revenue forecast that fell short of analyst expectations. PayPal otherwise beat earnings and revenue expectations for the third quarter.

— Sarah Min

As of Thursday’s close, the major averages are set for a losing week. Here are where they stand heading into Friday’s jobs report:

• The Dow Jones Industrial Average is down 2.62%, on pace to break a 4-week winning streak.
• The S&P 500 is down 4.65%, on pace to break a 2-week winning streak. The broader market index is set for its worst weekly performance since Sept. 23, when it fell 4.65%.
• The Nasdaq Composite is down 6.84%, on pace to end a 2-week winning streak. The tech-heavy index is on track for its worst weekly performance since Jan. 21, when it fell 7.55%. 

— Sarah Min, Christopher Hayes

U.S. stock futures fell slightly Thursday night after the major averages dropped for a fourth day, and investors looked ahead to the October jobs report for clues into the pace of future rate hikes from the Federal Reserve.

Dow Jones Industrial Average futures fell by 24 points, or 0.06%. S&P 500 and Nasdaq 100 futures dipped 0.09% and 0.1%, respectively.

— Sarah Min