Bloomberg
New York


While everything from Glencore to the Labour Department threw punches at US stocks last week, nothing landed the knockout blow.
The Standard & Poor’s 500 Index ended the week with a gain of 1%, rebounding from a loss of more than 2.5% on Monday after Glencore roiled global markets and a 1.6% retreat on Friday following a monthly US employment report. Industries from biotechnology to raw materials bounced back after reaching lows for the year.
Investors fought back after stocks tumbled toward the lows of August’s sell-off, when the S&P 500 entered its first correction in four years. The closing level of 1,867.61 on August 25 is proving to be a resistance level, as buyers materialised after the gauge fell within 5 points of the low on Tuesday and within 30 points on Friday.
“A lot of the nervous money has already left the market,” said Walter “Bucky” Hellwig, who helps manage $17bn as a senior vice president at BB&T Wealth Management in Birmingham, Alabama. “If there was any day you could make the case for the market going down, it’s on the Friday of a weak employment report, but the market stabilized and that’s encouraging.”
US equities have seesawed between gains and losses since August’s sell-off, as investors wrestle with concerns about a slowing global economy and confusion over the Federal Reserve’s plans for higher interest rates. The two issues have haunted financial markets for months, resulting in the worst quarterly performance for global equities in four years.
The S&P 500 started the week with its biggest decline in a month, dropping 2.6% as London-based Glencore plunged 29%, becoming the latest victim of China’s sputtering economy and a sell-off in commodity prices. The benchmark equity gauge lost as much as 0.5% on Tuesday before staging a late recovery that led into a 1.9% rally the next day. That set the stage for Friday’s release of government jobs data.
The report showed payrolls rose less than projected in September, sending stocks plummeting at the open amid concern the global slowdown and financial-market turmoil are rippling through the world’s largest economy. Buyers started jumping in by late morning, and equities gathered momentum to end the day up 1.4%. The recovery was the biggest intraday rebound from a loss of more than 1.5% since October 2011.
While the weak report vindicated the Fed’s decision to delay an interest-rate increase last month, the debate continued over whether the US economy is strong enough to weather weakness from overseas.
As stock charts fluctuate, some traders are betting on a more lasting turnaround in the S&P 500. Their faith can be measured in the market capitalisation and outstanding shares of a security that has come to serve as a proxy for the strategy known as shorting volatility. Both values are close to a four- year high and have held steady amid price swings in the market.
The S&P 500’s late-week recovery mirrored performance in a Goldman Sachs Group basket of the 50 most-shorted companies in the Russell 3000 Index. The group of stocks slipped 6.7% to start the week, only to rebound 6.1% from Wednesday to Friday.
The Chicago Board Options Volatility Index, having surged 34% in the third quarter, slid 11% for the week. Still, it remains above 20, a level it’s exceeded for the past 30 sessions, the longest such streak since January 2012.
In addition to volatility remaining high, there are other signs stocks may not have reached a bottom.
While the S&P 500 itself has shown resilience, ending the week 4.5% above the August 25 closing level, a third of the stocks in the index are trading below their lows. Apple, Microsoft Corp and Exxon Mobil Corp, the three largest companies by market cap, account for about 15% of gains since the market bottomed.
Some industries managed to show signs of strength by Friday. Energy and raw-materials companies, the worst performers of the year among 10 groups in the S&P 500, had the best showing for the five days, rallying more than 2.7%.
After plummeting into a bear market a week earlier, the Nasdaq Biotechnology Index climbed 1.8%.
The gauge lost 6% on Monday amid an eight-day slide following a tweet from Hillary Clinton criticising “price gouging” in the industry, only to rally on the final three days. The broader S&P 500 health-care index increased 2.1%.
Semiconductor makers in the S&P 500 rose 2.8%, with Intel Corp, Micron Technology and Nvidia Corp gaining more than 5%.
Stocks that benefit in a low-rate environment got a boost, while financial shares slumped. An index of bank stocks slipped 1.5% as Bank of America Corp, US Bancorp and Northern Trust Corp decreased more than 2.2%. Sustained low rates are starting to put pressure on bank margins, while higher interest rates would enable banks to earn larger spreads on deposits.
While the debate over interest rates and the economy continues in the coming week, investors will get more to contemplate as earnings season begins. Alcoa will present its results after the market close on October 8. Companies in the benchmark index are expected to see earnings contraction of 0.1% for the year.
“With the correction we’ve seen, valuations have come back to attractive levels,” Christian Preussner, Frankfurt-based managing director of US equities at JPMorgan Asset Management, said in an interview in Singapore. “I think that the companies’ earnings will be proving that the companies in the US are very well positioned and that they are attractive.”