Market Outlook – October 5, 2018

U.S. Benchmarks Drop as Bond Yields Rise

 

The three main U.S. stock market benchmarks dropped on Thursday due to the increase of government bond yields. After 5 straight days of gains, the Dow Jones Industrial Average fell 200.91 points (-0.75%) to 26,627.48 and register the index’s worst point-drop since July 11.

The Dow dropped by as many as 357 points during trading. According to Dow Jones Market Data, it was also the biggest percentage drop since August 10.

Meanwhile, the S&P 500 Index and the Nasdaq Composite Index posted their sharpest drop since late June. Some observers view Nasdaq’s skid as a sign of panic selling. The tech-heavy index lost 145.58 points (-1.81%) to close at 7,879.51. The broader S&P 500 slid 23.90 points (-0.82%) to finish at 2,901.61.

The yield on the 10-year U.S. Treasury note went up to 3.196% (3.8 basis points) after topping 3.23%. The rate is its highest since 2011. Usually, a higher bond yield dampens investor enthusiasm for stocks. The shift to bonds without the risk or volatility happened once more.

September Jobs Report Out Today

 

At exactly 8:30 a.m. ET, the U.S. Labor Department will release the highly anticipated September jobs report. Analysts are predicting employment growth to be strong again. Refinitiv conducted a survey among economists and the results showed 185,000 net new jobs being added to the U.S. economy.

The figure would be slightly lower than the 194,200 average monthly gains over the past year. Wage growth is crucial and if it hits 3% for the first time since April 2009, it may worry investors as the Federal Reserve might be prompted to raise interest rates again.

Apple and Amazon Denies Malicious Infiltration

 

Bloomberg Businessweek reported on Thursday that the systems of Apple Inc. (AAPL) and Amazon.com Inc. (AMZN) had been infiltrated by malicious computer chips inserted by Chinese intelligence agents. Both the tech giant and the e-commerce behemoth denied the report.

There were 17 unidentified sources from intelligence agencies and business that Bloomberg cited. The sources claim that Chinese spies had placed computer chips inside equipment used by about 30 companies and multiple U.S. government agencies. If true, Beijing would have secret access to the internal networks.

However, security experts who worked for government agencies and large companies told Reuters that there are discrepancies between the Bloomberg article and the strongly worded denials from Apple and Amazon’s Amazon Web Services.

Some said some allegations were plausible but strong denials from the two U.S. firms leave doubts as to whether the attacks actually happened. “There is no truth.” per Apple and “This is untrue.” from an Amazon blog post.

Samsung Boasts of Highest Quarterly Earnings

 

Samsung, the world’s largest smartphone maker, boasted on Friday that the company expects to deliver their highest quarterly earnings ever. The South Korean firm said its operating profits will reach as much as 17.6 trillion won ($15.6 billion) for the three months ended in September. That would be more than 20% from the same period a year earlier. Samsung will present its full report by the end of October.

U.S. Government to Revise Rules on Self-Driving Cars

 

U.S. Transportation Secretary Elaine Chao released a document relating to self-driving cars on Thursday. The document confirms that the Trump administration is proceeding with plans to revise the safety rules.

Currently, self-driving cars without equipment such as steering wheels, pedals and mirrors are barred from the roads. The National Highway Traffic Safety Administration (NHTSA) “intends to reconsider the necessity and appropriateness of its current safety standards” as applied to automated vehicles.

Chao said that self-driving cars have the potential to radically reduce traffic crashes and road deaths.  However, she also added that the “public has legitimate concerns about the safety, security, and privacy of automated technology.”

Automakers should meet nearly 75 auto safety standards. Many of standards assume that a licensed driver will be in control of the vehicle.

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