Closing Stock Market SummaryThe stock market kicked off November on an upbeat note. The S&P 500, Dow, and Nasdaq were up 1.0%, 1.5%, and 0.7%, respectively, at this morning's highs. The initial upside push was driven by some optimism about China potentially entertaining a shift in coming months to its zero-COVID policy, falling Treasury yields, and some M&A buzz after Johnson & Johnson (JNJ 173.09, -0.88, -0.5%) said it would acquire Abiomed (ABMD 377.82, +125.74, +49.9%) at a 47% premium over yesterday's closing price.
The market quickly shifted to retreat mode, though, after the release of economic data at 10:00 a.m. ET. That data included a weaker-than-expected ISM Manufacturing Index for October, a stronger-than-expected Construction Spending Report for September, and a stronger-than-expected JOLTS - Job Openings Report for September.
The main sticking point in the data was the elevated JOLTS number, indicating the labor market remains strong and that wage-based inflation pressures are likely to continue. That understanding created some concerns that the Fed might not soften its rate hike approach following the November meeting.
Both the stock and Treasury markets saw buyers step away in the wake of the data and retreat to lower price levels. The 10-yr Treasury note yield, which was below 4.00% while stocks rallied, settled at 4.05%. The 2-yr note yield, at 4.43% earlier, settled at 4.51%.
After the dealing with the initial retreat, the stock market reverted to wait-and-see mode and stuck to a fairly narrow trading range for the remainder of the session. This come ahead of the FOMC decision tomorrow at 2:00 p.m. ET followed by Fed Chair Powell's press conference at 2:30 p.m. ET.
Notably, small and mid cap stocks fared better than their larger peers today. The Russell 2000 (+0.3%) and S&P Mid Cap 400 (+0.4%) sported a modest gain while the three main indices closed below the flat line.
Semiconductor stocks were a specific pocket of strength today. The PHLX Semiconductor Index (SOX) closed up 0.7% after some pleasing earnings news from Lattice Semi (LSCC 52.58, +4.07, +8.4%) and NXP Semi (NXPI 151.85, +5.77, +4.0%).
On an individual basis, Uber (UBER 29.75, +3.18, +12.0%) was a winning standout for growth stocks after posting quarterly results and raising its Q4 adjusted EBITDA guidance.
Roughly half of the 11 S&P 500 sectors suffered a loss today with communication services (-1.3%) buried in last place. Meanwhile, energy (+1.1%) sat atop the leaderboard while oil prices rose in response to the prospect of China "reopening" in coming months. WTI crude oil futures rose 2.2% to $88.40/bbl.
Ahead of Wednesday's open, Brinker (EAT), C.H. Robinson (CHRW), Canada Goose (GOOS), CVS Health (CVS), Dine Brands (DIN), DISH Network (DISH), Estee Lauder (EL), Ferrari (RACE), Generac (GNRC), Humana (HUM), New York Times (NYT), Paramount Global (PARA), Rockwell Automation (ROK), Scotts Miracle-Gro (SMG), Vulcan Materials (VMC), Yum! Brands (YUM), and Zimmer Biomet (ZBH) are set to report earnings.
Looking ahead to Wednesday, market participants will receive the following economic data:
- 7:00 ET: Weekly MBA Mortgage Index (prior 1.7%)
- 8:15 ET: October ADP Employment Change (Briefing.com consensus 198,000; prior 208,000)
- 10:30 ET: Weekly crude oil inventories (prior +2.59 mln)
- 14:00 ET: November FOMC Decision (Briefing.com consensus 3.75-4.00%; prior 3.00-3.25%)
Reviewing today's economic data:
- The October ISM Manufacturing Index dropped to 50.2% ( consensus 50.0%) from 50.9% in September. A number above 50.0% is indicative of expansion, yet the lower reading versus September points to a deceleration in overall manufacturing activity. October marked the 29th consecutive month of expansion in the manufacturing sector, yet it was the lowest reading since May 2020.
- The key takeaway from the report is that it connotes a moderation in manufacturing activity that is bordering on a contraction in manufacturing activity, which hasn't been seen since the pandemic-led contractions in April and May 2020. The tepid reading will raise concerns about the U.S. economy being at risk of experiencing a recession.
- Total construction spending increased 0.2% month-over-month in September (consensus -0.5%) following an upwardly revised 0.6% decline (from -0.7%) in August. Total private construction was up 0.4% month-over-month while total public construction spending was down 0.4%. On a year-over-year basis, total construction spending was up 10.9%.
- The key takeaway from the report is that new single-family construction (-2.6%) continues to be a major drag on overall construction spending, reflecting the adverse impact of the spike in mortgage rates, higher building costs, and weakening homebuilder sentiment.
- JOLTS Job openings totaled 10.717 million in September from the prior revised total of 10.280 million (from 10.053 million).
Dow Jones Industrial Average: -10.1% YTD
S&P Midcap 400: -14.1% YTD
S&P 500: -19.1% YTD
Russell 2000: -17.5% YTD
Nasdaq Composite: -30.4% YTD