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Stock Power Up in Relief Rally, PIMCO Legend Bill Gross Begins a New Chapter at Janus


Today's financial recap and tomorrow's financial outlook.

Traders responded to Thursday's ugly selloff and volatility spike with a relief rally on Friday.

The S&P 500 (SPX) hit an early morning low at 1,966.22, but caught fire in the afternoon. The S&P recovered the 50-day moving average level which was broken on Thursday before surging to finish up 0.9% at 1,982.85.

This was a repeat of the action on Wednesday, which saw a rebound following a tough Tuesday.

On both Tuesday and Thursday, the VIX made historically large upside moves, indicating negative sentiment supportive of a near-term bottom. In both cases, the bulls obliged.

Energy stocks led the way up today, buoyed by an increase in crude oil prices. Tech stocks also did quite well. Apple rose 2.9% as fears over iPhone 6 quality issues abated. Earlier in the week, the company came under fire over reports that the phones were prone to bending, but Apple said only a small minority of users had issues.

Shares of Yahoo! (YHOO) were up 1.71% to $40.66 after activist hedge fund Starboard Value LP announced that it acquired a significant stake in the company. Starboard also sent a letter to Yahoo! management requesting changes in business strategy that could unlock shareholder value.

Economic data was mixed today.

The third estimate of second-quarter GDP growth was reported this morning. GDP grew at a 4.6% annualized rate, in-line with economists' estimates. However, personal consumption rose just 2.5%, below the 2.5% consensus.

The final reading of University of Michigan final September consumer sentiment index was 84.6, fractionally below the 84.8 expected.

However, much of the day's news overshadowed by the departure of legendary bond investor Bill Gross from PIMCO.

Gross is joining Janus Capital Group (JNS), which saw its stock rise 43.02% on the announcement.

PIMCO closed-end funds managed by Gross sold off aggressively on the news. The PIMCO High Income Fund (PHK) and Pimco Corporate & Income Opportunity (PTY) were each down by more than 6%.

PIMCO parent company Allianz SE sold off by 6.2%.

However, the fallout from Gross' departure was felt throughout the bond world.

Research firm Sanford C. Bernstein said Gross' departure could result in PIMCO losing 10-30% of its assets. In anticipation, traders sold off US Treasuries today, sending the 10-Year yield up to 2.535%. High-yield bonds were weak as well.

Tomorrow's Financial Outlook

At 8:30 a.m. ET, Personal Income and PCE Prices for August will be reported.

That will be followed by August Pending Home sales at 10:00 a.m., which could impact housing stocks, which have been lagging as of late.

Trading could be impacted by news out of Russia and the Middle East, which has been driving up volatility as of late. Market participants do appear to be on edge, turning markets into a bit of a rollercoaster, at least in relation to the slow and steady grind seen earlier in the year.

Twitter: @Minyanville

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No positions in stocks mentioned.

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