A surprisingly soft jobs report on Friday provided a much-needed boost to investor sentiment, easing concerns about inflation and recession fears. The Dow and S&P 500 ended the week lower, but the Nasdaq managed a gain, driven by strong performance in technology stocks.
Key highlights included Nvidia (NVDA) hitting a new all-time high on the back of an enhanced share buyback program, and Micron Technology (MU) delivering a blowout quarter with a bullish outlook, despite increased spending on manufacturing capacity.
Stocks closed on a high note Friday, buoyed by a jobs report that provided a "Goldilocks" scenario for investors – not too hot to fuel inflation fears, and not too cold to signal an impending recession. Despite the positive finish, the gains were not enough to pull all three major stock indices into positive territory for the week.
The Dow Jones Industrial Average finished the week down 1.26%, and the S&P 500 saw a 0.3% decline. These indices were weighed down by persistent concerns over elevated oil prices and rising long-term bond yields. However, the Nasdaq Composite managed a modest gain of 0.45% for the week, largely driven by the insatiable demand for all things artificial intelligence.
Key Developments Driving Market Action:
- The "Bad News is Good News" Jobs Report: September's nonfarm payrolls report revealed that the U.S. economy added only 29,000 jobs, with the unemployment rate ticking up to 4.2%. This figure fell short of economists' expectations and suggested a cooling labor market. The data increased the likelihood that the Federal Reserve would hold interest rates steady at its late October meeting, a sentiment reinforced by a cooler-than-expected August personal consumption expenditures (PCE) price index released earlier in the week. The market is now pricing in a 78% chance of a rate hold in October, up significantly from 36% a week prior. This softer economic data prompted a rally on Friday, with the Dow adding 0.5%, the S&P 500 gaining 0.7%, and the Nasdaq climbing 1.2%.
- Micron's Optimistic Outlook: Memory chipmaker Micron Technology (MU) delivered a strong quarterly earnings report on Wednesday, exceeding revenue and earnings expectations. More importantly, the company's management provided a bullish outlook on the supply-demand balance for memory chips and signaled a significant stock buyback program. Revenue surged 379% year-over-year to $54.23 billion, with adjusted earnings per share at $33.42. Micron projects first-quarter fiscal 2027 revenue of $61.5 billion and adjusted EPS of $38.15, both surpassing Wall Street estimates. Despite the positive report, shares experienced some pressure as investors weighed the company's planned increased spending on manufacturing capacity. However, Micron anticipates even tighter market conditions in 2027 and 2028, with a substantial portion of its projected 2027 output already committed and 26 strategic customer agreements in place. Analysts see the company's outlook as the "best that I've ever heard" for the next couple of years, with a potential catalyst in December when CHIPS Act funding restrictions ease, allowing for a significant share repurchase. The company's price target was raised to $1,200 from $1,100.
- Nvidia's Enhanced Buyback Program: AI darling Nvidia (NVDA) announced a substantial increase to its share repurchase authorization, adding an additional $150 billion to its existing program, bringing the total to $235 billion. This move addresses investor calls for the company to deploy its massive cash flow for shareholder returns. With Wall Street expecting Nvidia to generate approximately $440 billion in free cash flow over the next six quarters, the company has ample financial flexibility to execute buybacks without hindering its AI leadership investments. The enhanced buyback is particularly significant given that Nvidia's stock performance, while strong with a roughly 24% year-to-date gain, has lagged behind some peers in the iShares Semiconductor ETF, despite consistent double-digit growth in adjusted EPS. On Friday, Nvidia's stock broke through its previous all-time intraday high set in May, signaling improving momentum. The expanded buyback program is seen as a major step towards unlocking shareholder value from the company's immense cash generation. Shares finished the week up 3.95%.
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