US stocks finished the day lower after a disappointing jobs report that was initially viewed positively because it suggested possible rate cuts. However, concerns about a recession took over, leading to a downward trend. Late-day buying helped reduce losses for the S&P 500. The Russell 2000, which is sensitive to rate changes, rose due to strong financial stocks. In contrast, the Nasdaq closed flat. Here’s how the major indexes ended: the S&P 500 dropped by 0.36%, the DJIA fell by 0.5%, and the Toronto TSX Composite gained 0.45%.

Weekly Market Performance

For the week, the S&P 500 rose by 0.3%, the Nasdaq Composite increased by 1.4%, the Russell 2000 added 1.0%, and the Toronto TSX Composite grew by 1.7%. Meanwhile, the DJIA decreased by 0.3%. The market is conflicted about whether bad news is actually good news. This was evident today when the September jobs report showed a disappointing increase of only 50,000 jobs, far from the expected 150,000, while unemployment rose to 4.2%. The initial positive reaction driven by hope for Federal Reserve rate cuts quickly faded, replaced by recession fears. This uncertainty has led to increased market volatility, with the VIX rising above 22 for the first time since July 2025. As option premiums increase, this could benefit strategies that sell volatility if we believe the market will stay within a certain range. We should consider trades like iron condors on the SPX to collect premiums from both sides.

Market Strategy and Opportunities

We are also observing a distinct split in the market. The Russell 2000 is rallying while the Dow Jones is declining. This suggests that smaller companies and financial stocks might gain more from potential rate cuts than they would lose from an economic slowdown. This presents opportunities for pair trades, such as buying calls on a financial ETF while purchasing puts on an industrial or consumer discretionary ETF. This price movement reminds us of late 2007, when the market initially celebrated the Fed’s first rate cuts, even while the economy was weakening. Those early relief rallies were short-lived as underlying weaknesses surfaced over the following months. Therefore, despite the high cost, we should consider purchasing longer-dated puts on major indices as a smart hedge against a potential downturn. Create your live VT Markets account and start trading now.

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