Weekend Wrap: Stocks Whacked At Week's End, NASDAQ Suffering Most; Global Condition Questionable

Back-to-back down sessions left the Dow Jones Industrial Average lower for the week and month, though only by 11 points, the dual declines amounting to a 380-point loss after the Dow had recorded three-straight all-time highs, so a pullback was not only likely, but probably helpful in the long term.

Stocks have been soaring due to strong economic data, but, at some point, valuation becomes an issue, and that point may have been reached this week. By far, the NASDAQ suffered more than the other indices as investors fled speculative positions in favor of more defensive ones, especially as treasury bond prices tumbled, sending yields on the 10-year note to their highest point since 2011.

The 10-year note closed out the week yielding 3.23, while the 30-year bond offered a yield of 3.40. Better yet, spreads widened, as the 2-year bill finished at 2.88, widening the spread on 2s-10s to 35 basis points, allaying some of the fears for an inversion in the curve, a condition that normally precedes a recession.

Friday's September non-farm payroll data from the BLS came in below expectations of 180,000, at 134,000 new jobs, adding to the shifting sentiment late in Wall Street's week. Unemployment ticked lower, however, from 3.9% to 3.7%, keeping the jobs picture still very much a positive one.

Losses on the NASDAQ (-3.21%) were the worst since March. Such a large loss, especially in the leadership group, may cause investors to reconsider their allocations, especially since October is normally a very volatile time. Besides the risk of further declines on valuation, many speculative tech stocks offer no dividends, an important element for stability in any portfolio.

Globally, markets were lower, with Europe suffering steep declines. The stock index of Europe's leading economy, Germany's DAX, is already in correction territory. Tremors from Italy's burgeoning funding crisis have caused concern in European bourses as the runaway Italian government continues to criticize the European Central Bank's (ECB) practices.

While Italy is unlikely to withdraw from the EU, there is mounting pressure on recently-elected leaders for more autonomy, citing the disastrous condition in Greece, following years of bailouts and forced austerity by EU leaders.

Emerging markets, including behemoths China and India, have been suffering from banking and regulatory malaise, and from a growing suspicion that the official data cited by governments is often fudged to appear better than reality.

The dollar eased late in the week against some currencies, a relief to those emerging markets, though not enough to avoid wholesale capitulation of home currencies, especially in Turkey and Argentina, two basket-case economies on the verge of inflationary and solvency collapses.

Those are the leading factors which has prompted investor flight to US equities and bonds, considered a global safety net, though the crowding of those markets has led to what currently is the condition of overvaluation in some sectors.

Gold and silver were bid slightly through the week, though the precious metals still remain close to there-year lows with no bottom having been found.

While general economic news in the US is good and should continue to be so, global conditions are far from rosy, which is leading to some shift in sentiment and flights to safety.

Dow Jones Industrial Average October Scorecard:

Date	Close	Gain/Loss	Cum. G/L
10/1/18	26,651.21	+192.90	+192.90
10/2/18	26,773.94	+122.73	+315.63
10/3/18	26,828.39	+54.45	+370.08
10/4/18	26,627.48	-200.91	+169.17
10/5/18	26,447.05	-180.43	-11.26

At the Close, Friday, October 5, 2018:
Dow Jones Industrial Average: 26,447.05, -180.43 (-0.68%)
NASDAQ: 7,788.45, -91.06 (-1.16%)
S&P 500: 2,885.57, -16.04 (-0.55%)
NYSE Composite: 12,991.95, -50.35 (-0.39%)

For the Week:
Dow: -11.26, (-0.04%)
NASDAQ: -257.91 (-3.21%)
S&P 500: -28.41 (-0.97%)
NYSR Composite: -90.67 (-0.59%)