Temper tantrum

Even before markets closed on Monday, some on Wall Street were already saying the market bloodbath was an overreaction to slowing US job growth. On Tuesday, a small bounce lent some credence to that thesis while yesterday’s market retreat did not. But on Thursday, shiny new employment data appeared, giving a clear sign that investors everywhere basically had a temper tantrum for no good reason. Initial applications for US unemployment benefits fell last week by the most in almost a year, helped by fewer applications in states such as Michigan, Missouri and Texas. The decline apparently helped reassure flustered markets that the US workforce isn’t disintegrating so much as reverting to its pre-pandemic trend, which—for everyone playing at home—is what the Federal Reserve has been shooting for in achieving a soft landing. —David E. Rovella

Stocks staged a big rebound as sheepish investors wiped away tears and shuffled back to their desks to buy. All major groups in the S&P 500 advanced, with the gauge notching its biggest rally since November 2022. As the angst subsided, Treasuries dropped across the curve—with the selloff led by shorter maturities. Here’s your markets wrap.

The end of the Fed’s balance-sheet unwind is in sight, though its actual conclusion depends on the pace of interest-rate cuts and stresses in funding markets. Many on Wall Street agree that an abrupt end to quantitative tightening, or QT, is unlikely, with policymakers signaling its rolloff of Treasury holdings will finish by year-end. But recent data suggesting the risk of liquidity pressures—already evident in the financial system—call that outlook into question. “If the Fed is cutting to stimulate the economy, then QT will likely stop,” Bank of America strategists Mark Cabana and Katie Craig wrote in a note to clients on Wednesday. “If the Fed is cutting to normalize policy, then QT can continue.”

Financial wizards have conjured another dizzying product to surf the derivatives boom: Cboe Global Markets is poised to offer options on futures for an index based on options on another index. (Read that again. We’ll wait.) It turns out the Chicago-based firm plans to issue options tied to futures for the Cboe Volatility Index, the famous “fear gauge” known as the VIX. That gauge is itself built using options that track the S&P 500. The new contracts—scheduled to list on Oct. 14, pending regulatory review—are the latest in a flurry of products unleashed by Cboe amid a record surge in trading volumes across the derivatives complex.

With Wall Street’s whiff on employment data and the resulting market drama, it’s tough to know where to put your nest egg. Tech stocks have been hit as investors question massive capital spending on artificial intelligence. There’s a contentious election looming, and a host of geopolitical conflicts are playing out around the world. But as uncomfortable as the volatility feels, it can bring opportunity. Here is where wealth managers tell us you should invest $1 million right now.

Russian army chief Valery Gerasimov faces growing criticism at home after Ukrainian troops mounted their biggest incursion into Russian territory since Vladimir Putin started his war more than two years ago. Gerasimov and top officials seemingly dismissed intelligence warnings that Ukrainian soldiers were gathering near the border with Russia’s western Kursk region as much as two weeks before they began the assault. Defensive forces inside Russia were caught off guard and offered little initial resistance to the Ukrainian advance.

Paramount Global took a second-quarter impairment charge of $6 billion on its cable networks, yet another sign of weakness in the traditional TV industry. The parent of Nickelodeon and MTV made the decision after reevaluating its businesses in light of declining profit projections, shifts in the cable-TV subscriber marketplace and the recently agreed-to merger with Skydance Media. The New York-based media giant joins Warner Bros. Discovery in taking such a step. Warner Bros. announced a $9.1 billion writedown on its cable networks Wednesday, businesses that include CNN and TNT.

The Democratic Party placed a big bet on Kamala Harris. If the first two weeks of her campaign are any measure, it looks to be paying off. In the Bloomberg Originals mini-documentary How Kamala Harris Is Recharging the Democratic Party, we show how it only took 48 hours for Harris, 59, to become the presumptive nominee, a cultural phenomenon and formidable opponent to a 78-year-old Donald Trump. Meanwhile, as Trump in a truth-challenged press conference changed course again from his initial retreat from debating Harris, new swing-state polls show the race tied.

Along the shores of Malibu, sales of lavish mansions for celebrities and California’s wealthy elite are toppling real estate records. A 9.5-acre oceanfront estate sold in June for $210 million, the most ever for a California residence. It surpassed the high mark set just last year by superstars Beyoncé and Jay-Z, who paid $190 million for a sprawling Malibu compound. It seems the area’s acute vulnerability to climate change isn’t stopping the super-rich from plunking down big bucks.

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