A rally that started Wednesday afternoon continued throughout Thursday’s session as Congress appeared poised to kick the debt-ceiling can down the road.
Yesterday’s buying was sparked by Senate Minority Leader Mitch McConnell’s offer for Republicans to allow a short-term lift of the federal borrowing limit. Democrats mulled the deal overnight, and this morning, Senate Majority Leader Chuck Schumer announced that “we have reached agreement to extend the debt ceiling through early December, and it’s our hope that we can get this done as soon as today.”
Investors should note, however, that as of publication, Senate Republicans had not yet secured the 10 votes necessary to get past a filibuster.
Also buoying spirits was an unexpectedly sharp drop in initial jobless claims, to 326,000 for the week ended Oct. 2, down from 364,000 and below estimates for 348,000.
Up next: The September jobs report.
“The big event for tomorrow is the Bureau of Labor Statistics employment report. Expectations have crept a bit higher following the ADP jobs survey and this morning’s initial claims both coming in ahead of expectations,” says Michael Reinking, Senior Market Strategist for the New York Stock Exchange. “U.S. September economic data broadly speaking suggests that the economy is starting to pick up steam after the August lull. Analysts are projecting that ~500,000 jobs were added to the economy last month. The unemployment rate is expected to tick down to 5.1% from 5.2%.”
The major indexes closed Thursday with similar gains: The Dow Jones Industrial Average improved 1.0% to 34,754, the S&P 500 finished up 0.8% to 4,399, and the Nasdaq Composite rose 1.1% to 14,654.
Other news in the stock market today:
- The small-cap Russell 2000 jumped 1.6% to 2,250.
- Levi Strauss (LEVI) popped 8.5% after the apparel maker reported earnings late Wednesday. In its fiscal third quarter, LEVI reported adjusted earnings of 48 cents per share on $1.50 billion in revenues, which came in above analysts’ consensus estimates for earnings of 37 cents per share on $1.48 billion in sales. Stifel analyst Jim Duffy reiterated his Buy rating on LEVI stock in the wake of the results. “Considering the high-single digit growth opportunities, structural margin potential to mid-teens and balance sheet optionality, we view the valuation compelling at current levels,” he wrote in a note.
- Twitter (TWTR, +4.4%) made headlines on some M&A news. The social media name said after Wednesday’s close that it is selling its MoPub mobile marketing network to AppLovin (APP) – a game developer and ad-tech firm – for $1.05 billion in cash. The selling price translates into a big return for TWTR, which bought MoPub for $350 million back in 2013. In a subsequent statement, Ned Segal, chief financial officer at Twitter, said the transaction allows the company to focus its efforts “on the massive potential for ads on our website and in our apps. We plan to accelerate product development and replenish the near-term revenue loss, with the goal of improving our time to market to deliver on our previously stated goal of at least doubling total annual revenue from $3.7 billion in 2020 to $7.5 billion or more in 2023.”
- U.S. crude futures jumped 1.1% to finish at $78.30 per barrel.
- Gold futures slipped 0.1% to settle at $1,759.20 an ounce.
- The CBOE Volatility Index (VIX) slid 7.2% to 19.49.
- Bitcoin prices pulled back from their recent gains, declining 2.0% to $53,981.18. (Bitcoin trades 24 hours a day; prices reported here are as of 4 p.m. each trading day.)
What’s on Tap Next?
For now, investors can return their focus to the economy. The next week or so will see a number of vital reports drop – most notable among them are the September jobs report (due 8:30 a.m. Friday) and the September consumer price index release (due 8:30 a.m. Oct. 13).
Broadly speaking, analysts expect signs of a recovery that still has plenty of wind in its sails, and that could influence the way some investors choose to allocate.
“This economic recovery is different than the last one, as we see more growth and more inflation,” says Gene Goldman, chief investment officer at Cetera Investment Management. “Expect value and cyclicals – basically investments that didn’t work in the last recovery – to work better this time.”
On the latter front, that could mean outperformance for sectors such as the aforementioned consumer discretionaries, as well as materials and financial stocks. As far as value goes? Well … that is increasingly hard to find in a stock market that remains near nosebleed valuations, even after some recent setbacks.
However, there are relative bargains to be found, even in some of Wall Street’s most cherished corners. To wit, the Dividend Aristocrats actually look like a bargain compared to the broader S&P 500 at the moment. These 13 Dividend Aristocrats stand out in particular, given their cheap prices compared to their own historical levels.