Here Are 3 Hot Things to Know About Stocks Right Now

  • The Dow Jones Industrial Average ended higher Thursday after a wild session that saw shifts from pessimism over economic news turn to optimism about further Fed rate cuts.
  • PepsiCo ( PEP - Get Report) climbed after the food and beverage giant posted stronger-than-expected third-quarter earnings and said it should beat its own organic sales forecast for the full year. PepsiCo is Real Money's Stock of the Day.
  • Constellation Brands (STZ - Get Report) shares fell after the beer, wine, and spirits company reported stronger-than-expected second-quarter earnings and lifted its full-year profit guidance, but took an $484 million loss from its holding in Canadian marijuana company Canopy Growth (CGC - Get Report) .

Wall Street Overview

Stocks finished higher Thursday, ending a two-day losing streak, after  a topsy-turvy session that saw equities tumble following a disappointing reading on U.S. services sector activity but rebound after the likelihood of an interest rate cut from the Federal Reserve increased.

The Dow Jones Industrial Average, which had fallen as much as 335 points, finished the day up 122 points, or 0.47%, to 26,201, the S&P 500 rose 0.80%, and the Nasdaq advanced 1.12%.
 
Pfizer ( PFE - Get Report) , Visa ( V - Get Report) , and McDonalds ( MCD - Get Report) led the Dow's late day advance.
 
Tech stocks also came on strong, with Nvidia ( NVDA - Get Report) , Micron Technology ( MU - Get Report) , and Facebook ( FB - Get Report) all reporting gains.
 
The probability of a rate cut of 25 basis points from the Fed later in October rose to 92.5% from 77%, according to CME Group's FedWatch tool.
 
"Today's ISM results and their manufacturing PMI reading released earlier in the week are a one-two punch for U.S. economic outlook - but this data shouldn't come as a surprise," said Eskander Yavar, national leader of BDO's manufacturing and distribution practice. "ISM first measured a decline in U.S. manufacturing back in August, and while manufacturing isn't as large a proportion of U.S. GDP as it once was, it is highly sensitive to changes impacting the broader economy. Think of it like a canary in a coal mine. The latest ISM data confirms that the forces impacting manufacturing are spreading to other sectors."
 
The Institute for Supply Management's non-manufacturing index slipped to 52.6, well shy of the Wall Street consensus of 55.  Investors focused on the services sector data after the ISM's earlier assessment of factory activity fell to the lowest level since the global financial crisis and triggered two days of fierce selling on Wall Street.

"This is much worse than it looks, because the headline index tends to track the rate of growth of core retail sales, which recently has been very strong," said Ian Shepherdson, chief economist at Pantheon Macroeconomics. "The big and widening wedge between rate of sales growth and the ISM index presumably reflects fear of the impact of tariffs on consumer goods on retailers sales and margins, and worries in the non-retail sector that peoples' broad spending power will be reduced by the need to devote more of their income to paying for tariffed goods."

Shepherdson added that back in the spring, "we thought that the president ultimately would not apply tariffs to consumer goods, on the grounds that most politicians would think it unwise to strip spending power from their core supporters -- tariffs disproportionately hurt people on lower incomes -- with an election in the offing."

"We were wrong, but the entirely predictable consequences are now coming to pass, even more quickly than we expected," he said.

Charlie Ripley, senior investment strategist for Allianz Investment Management, said that "essentially, this report is telling us that the uncertainty surrounding the global economy and the manufacturing sector in particular has started to spill over to the broader service sector economy."

"The weaker readings on both the manufacturing and non-manufacturing surveys are signaling that slower economic growth lies ahead and markets have responded with a knee-jerk reaction over the past few days," Ripley said. "However, with these data points only being survey-based measures to gauge the economy, investors will be looking for further evidence of economic weakness in the labor market, which makes tomorrow's report that much more important."

Much of the weakness in the manufacturing data from earlier in the week was linked to the ongoing trade conflict between the U.S. and China, but investors are now growing concerned that this could expand to include Europe after the WTO ruled Wednesday that Washington could counter illegal subsidies to planemaker Airbus  (EADSY) with tariffs on $7.5 billion worth of goods including airplanes made by Boeing's (BA - Get Report) main rival, French wine, British whiskey and Italian cheese.

 
Attorney General William Barr will ask Facebook CEO Mark Zuckerberg to delay plans to encrypt the company's three messaging services until officials can determine it will not reduce public safety, according to BuzzFeed News. Barr will be joined by officials from the United Kingdom and Australia, Buzzfeed said. 
 
Shares of PepsiCo ( PEP - Get Report) climbed 3% to $137.93 after food and beverage giant posted stronger-than-expected third-quarter earnings and said it should beat its own organic sales forecast for the full year. PepsiCo is Real Money's Stock of the Day.
 
Constellation Brands ( STZ - Get Report)  fell 6.1% to $194.26 after the beer, wine, and spirits company reported stronger-than-expected second quarter earnings and lifted its full-year profit guidance but took an $484 million loss from its holding in Canadian marijuana company Canopy Growth ( CGC - Get Report) .

Tesla (TSLA - Get Report) fell 4.2% to $233.03 after the electric carmaker reported 97,000 deliveries for the third quarter. Wall Street analysts had expected around 98,000 deliveries for the quarter.

Bed Bath & Beyond (BBBY - Get Report)   rose 2.7% to $10.29 after the home furnishings retailer posted weaker-than-forecast same-store sales over its fiscal second quarter, and trimmed its full-year profit guidance, amid its ongoing turnaround program.

Brent crude contracts were down 17 cents to $57.52 a barrel, while West Texas Intermediate contracts, which are more tightly linked to U.S. gas prices, were off 41 cents to $52.23 a barrel.

PepsiCo, Nvidia, Pfizer, and Facebook  are holdings in Jim Cramer's Action Alerts PLUS member club . Want to be alerted before Jim Cramer buys or sells these stocks? Learn more now.

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