Stock Market In Correction; Merck Covid Drug Rocks Moderna, BioNTech:

The stock market rally turned into a market correction as the Nasdaq and growth stocks led a sharp sell-off amid rising Treasury yields, higher energy prices and Congress struggling to pass key legislation. Retailers and apparel makers fell hard as Bed Bath & Beyond (BBBY) became the latest to warn on supply-chain issues. Merck (MRK) shot up Friday on Covid-19 antiviral pill with “compelling trial” results. That rocked vaccine makers Moderna (MRNA) and BioNTech (BNTX). Micron (MU) gave a weak outlook, a bad sign for chip names.

X

Stock Market In Correction

The Dow Jones, S&P 500 and Nasdaq composite suffered sharp weekly losses, with growth stocks having their worst week since the coronavirus crash. IBD has shifted the market direction status to “correction.” The 10-year Treasury yield ran up to a three-month high, paring gains slightly. Bed Bath & Beyond (BBBY) rocked retail stocks by becoming the latest to warn on Covid-related supply chain woes. Moderna (MRNA) and BioNTech (BNTX) plunged, with a Merck (MRK) Covid-19 antiviral pill adding to the losses. Fertilizer, energy and bank stocks fared well.

Economy Powers On

The economy continues to power through pandemic-related supply-chain woes, labor shortages, inflation, the delta variant and the lapse of fiscal stimulus. The ISM manufacturing index unexpectedly rose to 61.1 in September from 59.9, signaling faster expansion, with 50 being neutral. New orders and production remained elevated, while the jobs gauge turned slightly positive. The increase stemmed in large part from slower supplier deliveries and higher prices. ISM noted “record-long raw materials lead times, continued shortages of critical materials, rising commodities prices and difficulties in transporting products.”

New claims for jobless benefits increased 11,000 to 362,000 in the week through Sept. 25, rising for the third straight week.

The personal consumption expenditure price index rose 4.3% in August vs. a year earlier, a 30-year high. Core PCE inflation, the Fed’s favorite inflation gauge, held at 3.6%. Fed chief Jerome Powell said earlier in the week that inflation would likely remain elevated for longer.

Crude Oil Price Touch Highs

Oil prices soared to $80 per barrel, the highest in nearly three years and U.S. natural gas prices surged to a seven-year high. But energy prices are skyrocketing in Europe and China. The U.K. faces a natgas shortage as a cold winter in 2020 depleted supplies and wind power failed to fill the gap. Russia has slowed its supply of natgas to Europe, sparking worries of widespread energy crunch heading into winter. China’s Jilin province, a major industrial center, faced blackouts as its governor pleaded for more coal to keep the lights on.

Merck Jumps On Covid Oral Antiviral

Merck (MRK) will seek emergency use authorization for their Covid oral antiviral treatment for Covid-19, citing “compelling results” in trials. The drug, molnupiravir, cut the risk of hospitalization or death by…