When Bad News Becomes Good News
It was a rollercoaster week on Wall Street, marked by an accelerated sell-off on Monday that gave way to a powerful mid-week rally. The bounce was fueled by a combination of factors.
First, tech giants came to the rescue with positive news from $Alphabet(GOOG)$ $Alphabet(GOOGL)$ and $Apple(AAPL)$ , sparking a strong rally on Wednesday.
The momentum continued on Thursday, ironically driven by bad news: a weak ADP jobs report signaled a deteriorating labor market. Traders, operating on the "bad news is good news" logic, grew confident that the Federal Reserve would be compelled to cut interest rates in ten days.
This optimism culminated on Friday with a stunning jobs report showing just 22,000 jobs added in August—a figure so far below expectations it triggered an immediate market surge. The $S&P 500(.SPX)$ and $NASDAQ(.IXIC)$ soared to all-time highs as traders bet on imminent rate cuts.
However, the celebration was short-lived. A late-day reversal dragged the market back down, erasing the gains and highlighting a deeper anxiety that the economy might be cooling faster than anticipated. The day's crash was prevented only by the independent rallies of three giants: $Broadcom(AVGO)$ $Oracle(ORCL)$ $Tesla Motors(TSLA)$, which rallied for reasons that are analyzed below.
Be prepared: after the euphoria comes the fear. The job market is deteriorating at a rapid pace, and given that recent figures have not yet been revised—a common occurrence—the potential for a deeper reduction remains.
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