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Closing Market Summary: S&P 500 Ends Bruising October with Back-to-Back Gains

The S&P 500 advanced 1.1% on Wednesday, securing a second straight day of gains to end a bruising October with a monthly loss of 6.9%. Mega-cap technology stocks were in control from the get-go, following Facebook (FB 151.79, +5.57, +3.8%) releasing its third quarter earnings report the previous evening.

The tech-sensitive Nasdaq Composite surged 2.0%, reducing its monthly loss to 9.2%, while the Dow Jones Industrial Average gained 1.0% to reduce its monthly loss to 5.1%. Small caps underperformed, with the Russell 2000 adding 0.3% to bring its monthly loss to 10.9%.

Facebook's "good enough" earnings report tempered negativity surrounding the stock, and its positive price action proved infectious for the other FANG stocks. Facebook beat earnings expectations and increased its revenue growth outlook, easing nerves after the social network warned of growth-deceleration last quarter. Of note, Facebook is still down 30.2% from its July 25 record close.

Alphabet (GOOG 1076.77, +40.56, +3.9%) and Netflix (NFLX 301.78, +15.97, +5.6%) joined Facebook with noteworthy gains on Wednesday, underpinning the strength in the communication services sector (+2.1%). Likewise, Apple (AAPL 218.86, +5.56, +2.6%) and Amazon (AMZN 1598.01, +67.59, +4.4%), respectively, provided strong support for the outperforming information technology (+2.4%) and consumer discretionary (+1.6%) sectors.

Also, the rate-sensitive and heavily-weighted financials sector outperformed the broader market with a gain of 1.4%. Top-weighted components JPMorgan Chase (JPM 109.02, +2.29) and Bank of America (BAC 27.50, +0.71) provided strong support with respective gains of 2.2% and 2.7%. Financials benefited from a slight steepening of the yield curve, with the 2-yr yield increasing four basis points to 2.88% and the 10-yr yield rising five basis points to 3.16%.

Conversely, underperforming sectors on Wednesday included the defensive-oriented consumer staples (-0.9%), utilities (-1.2%), and real estate (-1.4%) groups. These spaces were the only S&P sectors to finish in negative territory. The consumer staples and utilities sectors, however, were the only sectors to end October with gains, up 2.1% and 1.9%, respectively.

In other earnings, General Motors (GM 36.59, +3.05, +9.1%), eBay (EBAY 29.03, +1.61, +5.9%), T-Mobile US (TMUS 68.55, +4.63, +7.2%), and Automatic Data (ADP 144.08, +6.82, +5.0%) all sported healthy gains after reporting better-than-expected results. On the other hand, Kellogg (K 65.48, -6.38) lost 8.9% after missing bottom line estimates and lowering its adjusted earnings outlook.

Also contributing to the rally was end-of-the-month activity from fund managers and possibly some short-covering activity. There was an underlying expectation for fund managers to boost their portfolio equity weightings following this month's sell-off. Concurrently, it stands to reason that short sellers were covering their positions, as the market enters what is historically a favorable seasonal period.

Separately, WTI crude extended its recent decline, losing 1.3% to $65.31/bbl, reaching its lowest level since August. The U.S. Energy Information Administration reported a weekly crude oil inventory build of 3.2 million barrels, marking the sixth straight week inventories have risen.

International equity markets finished Wednesday on a higher note. In Asia, Japan's Nikkei gained 2.1% after the Bank of Japan made no changes to its policy stance, and China's Shanghai Composite added 1.4% to notch its second consecutive gain. Meanwhile, the Euro Stoxx 50 tallied a 1.6% gain with France's CAC (+2.3%) leading the advance.

Reviewing Wednesday's batch of economic data, which included the October ADP Employment Change report, the third quarter Employment Cost Index, and the weekly MBA Mortgage Applications Index:

• The third quarter employment cost index increased 0.8% ( consensus +0.7) versus 0.6% in the second quarter. Wages and salaries, which comprise about 70% of compensation costs, increased 0.9%, while benefit costs jumped 0.4%.
  • The key takeaway from the report is that it corroborates a trend of rising compensation costs for civilian workers that have been discussed by employers and which have kept the Federal Reserve on a tightening path.
• The ADP National Employment Report showed an increase of 227,000 in October (consensus 180,000), and the September reading was revised to 218,000 (from 230,000).
• The weekly Mortgage Applications Index showed a decrease of 2.5% versus an increase of 4.9% in the prior week.

Looking ahead, investors will receive a flurry of economic data on Thursday, including the October ISM Manufacturing Index, the preliminary Q3 Nonfarm Productivity and Unit Labor Costs report, the weekly Initial and Continuing Claims report, September Construction Spending, and Auto and Truck Sales for October.

• Nasdaq Composite +5.8% YTD
• Dow Jones Industrial Average +1.6% YTD
• S&P 500 +1.4% YTD
• Russell 2000 -1.6% YTD

Gapping down
In reaction to disappointing earnings/guidance:

• CLVS -20.8%, DDD -20.5%, MDR -20.4%, TCS -19.9%, OMI -18.3%, NTRI -11.6%, TTMI -10.9%, SFLY -10.3%, CRAY -9.1%, MAXR -7.6%, IQ -7%, PAYC -6.5%, SPWR -6.4%, SIMO -6.2%, CLX -6%, NUVA -5.6%, OPHT -4.9%, EA -4.6%, NXGN -3.1%, APY -3%, MXIM -2.6%, EXK -2.4%, BAX -2.4%, NMR -1.9%, GRVY -1.9%, TAP -1.8%, CIM -1.7%, OI -1.6%, QLYS -1.6% (also acquires container-native application protection company Layered Insight; terms not disclosed), APTV -1.3%, .

Other news:

• TSRO -11.8% (following CLVS results)
• CIM -1.7% (declared unchanged dividend of $0.50/share)
• GNC -1.3% (provides update on Harbin Pharmaceutical Group transaction and postpones release of third quarter results until after the close on November 9)

Analyst comments:

• QCOM -1.6% (downgraded to Neutral at BofA/Merrill)

Gapping up
In reaction to strong earnings/guidance:

• RBBN +18.9%, HABT +10.1%, EXAS +10%, BEAT +9.9%, SSW +9.3%, IGT +8.4%, ACAD +8.1%, EBAY +6.9%, YUMC +6.7%, FEYE +6.5%, DENN +6.4%, WLL +5.6%, EL +5.2%, FB +5.1%, TX +4.7%, QNST +4.5%, EVTC +4.2%, YUM +4.1%, TMUS +4%, UTHR +3.9%, CXO +3.8%, SNY +3.8%, CAI +3.5%, BG +3.2%, ICPT +3.2%, BJRI +3.1%, CRTO +3%, BAND +2.9%, HFC +2.8%, AINV +2.6%, SAN +2.5%, TENB +2.2%, CAKE +1.9%, STNG +1.8%, MGM +1.6%, ZEN +1.6%, TEF +1.6%, CHT +1.6%, EPD +1.5%, ADP +1.3%, ETR +1.3%, GNW +1.2%, OKE +1%, CDW +0.9%, .

M&A news:

• LKSD +23.7% (to be acquired by Quad/Graphics (QUAD) for approximately $1.4 bln in stock)
• ARNC +8.1% (on reports of Apollo Global (APO) M&A talks)
• NWL +1.8% (ticking higher on reports the company is nearing deal to sell Jostens)

Select FAANG related names showing strength:

• NFLX +2.3%, AMZN +1.9%, GOOGL +1.4%, AAPL +0.8%

Other news:

• KMPH +20.2% (KemPharm enters into license agreement with KVK Tech for the commercialization of APADAZ)
• KIN +15.4% (announces positive topline results for pilot effectiveness study of KIND-016)
• ACAD +8.1% (announces 'positive' top-line results from CLARITY study in major depressive disorder)
• CERC +7.1% (Cerecor receives Rare Pediatric Disease Designation from FDA for CERC-801)
• MMI +5.3% (to join S&P SmallCap 600)
• SAGE +2.6% (FDA publishes briefing documents ahead of November 2 AdCom on brexanolone)
• PZZA +1.6% (following late surge higher on reports of competing interest from several PE firms)

Analyst comments:

• ASML +1.8% (upgraded to Buy from Hold at Santander)
• CMI +1.2% (upgraded to Neutral at JP Morgan)
• CF +1.1% (upgraded to Buy at BofA/Merrill)
• GE +1% (upgraded to Buy at UBS)

Early premarket gappers

Gapping up:

• KMPH +34.9%, RBBN +18.9%, KIN +15.4%, HABT +10.1%, BEAT +9.9%, EXAS +8.9%, ARNC +8.1%, CERC +7.1%, SSW +7.1%, MMI +6.9%, FEYE +6.8%, YUMC +6.7%, TX +4.7%, LKSD +4.7%, QNST +4.5%, EBAY +4.3%, QUAD +4.1%, SNY +4%, WLL +4%, SNY +4%, BJRI +3.9%, CAI +3.5%, ZEN +3.3%, FB +3.1%, SAN +3%, BAND +2.9%, AINV +2.6%, TENB +2.2%, CAKE +1.9%, TEF +1.9%, NFLX +1.6%, AMZN +1.6%, HLF +1.5%, GOOGL +1.2%, GRMN +1.2%, NWL +1.2%, GNW +1.2%, MGM +1.2%, TMUS +1.2%, AAPL +1%, OKE +1%, CXO +0.9%, AJRD +0.8%, REXR +0.8%, BG +0.7%, MSFT +0.6%

Gapping down:

• MDR -21.1%, CLVS -20.5%, DDD -20.3%, TCS -19.9%, TSRO -11.8%, NTRI -11.6%, TTMI -10.9%, SFLY -10.3%, CRAY -9.1%, NANO -8.9%, IQ -6.8%, SIMO -6.2%, SPWR -5.8%, NUVA -5.6%, EA -3.2%, NXGN -3.1%, APY -3%, MXIM -2.6%, PAYC -2.3%, KEYS -2%, VRSK -1.9%, CIM -1.7%, OI -1.6%, QLYS -1.6%, GNC -1.3%

Closing Market Summary: Stocks Finish Strong in S&P 500 Rally

The S&P 500 gained 1.6% in Tuesday's session, in which it traded mostly in positive territory with all 11 S&P sectors closing higher. The notable gain reduces the benchmark index's month-to-date loss to 7.9% and puts it back into the green for the year (+0.3%).

Tuesday's price action in the S&P 500 oscillated with the volatility in large-cap technology stocks before finally taking a decisive swing upwards in the last hour of trading. The tech-heavy Nasdaq Composite, which had lost as much as 0.7% intraday, closed at its session high with a 1.6% gain.

Meanwhile, the Dow Jones Industrial Average added 1.8%, and the Russell 2000 added 2.0%.

The S&P 500's most heavily-weighted and battered information technology sector (+1.2%) kept the rally in check, as it was one of Tuesday's underperforming groups. Nevertheless, chipmakers supported the sector and outperformed the broader market, as the Philadelphia Semiconductor Index climbed 4.2%. Notable chipmaker NVDIA (NVDA 203.00, +17.38) jumped 9.4%.

Also providing the broader market some lift were the communication services (+2.5%), materials (+2.3%), energy (+2.3%), industrials (+2.0%), and consumer staples (+2.0%) sectors. Communication sector heavyweights Alphabet (GOOG 1036.21, +16.13, +1.6%) and Facebook (FB 146.22, +4.13, +2.9%) led the group higher, with Facebook rallying ahead of its earnings, which were due out following the closing bell.

Amazon (AMZN 1530.42, -8.46, -0.6%), however, continued to disappoint, as it was the only FANG member to post a loss. Shares of the e-commerce giant are down 25.0% from their September 4 record close.

In earnings, Dow components Pfizer (PFE 42.89, -0.34, -0.8%) and Coca-Cola (KO 47.63, +1.17, +2.5%) both reported better-than-expected profits. Pfizer, however, lowered its revenue guidance, while Coca-Cola reaffirmed its guidance. Additionally, former Dow component General Electric (GE 10.18, -0.98) fell 8.8% to its lowest level in nearly a decade after missing top and bottom line expectations and cutting its quarterly dividend from $0.12 per share to $0.01 per share.

Also, an honorable mention goes to Under Armour (UAA 23.23, +5.04) after it soared 27.7% following a better-than-expected earnings report.

In other markets, the U.S. Dollar Index climbed 0.4% to 97.00, touching its highest level since June 2017. Also, the yields on the 2-yr and 10-yr Treasury notes added two basis points each to 2.84% and 3.11%, respectively. Meanwhile, WTI crude decreased 1.2% to $66.24/bbl, hovering near a two-month low.

Overseas, Hong Kong's Hang Seng lost 0.9% on Tuesday, hitting a fresh low for the year, while China's Shanghai Composite gained 1.0% as the Chinese yuan reached its lowest level since mid 2008. Meanwhile, the Euro Stoxx 50 decreased 0.3% with Germany's DAX closing 0.4% lower.

Reviewing Friday's economic data, which included the Consumer Confidence Index for October and the Case-Shiller 20-City Index for August:

• The Conference Board's Consumer Confidence Index, which revolves heavily around labor market and business conditions, increased to 137.9 in October (consensus 135.8) from a downwardly revised 135.3 (from 138.4) in September. The October reading is the highest since September 2000.
  • The key takeaway from the report is that strong employment growth continues to underpin favorable consumer attitudes about present-day conditions and the outlook.
• The Case-Shiller 20-City Index for August rose 5.5% (consensus 5.9%), and the July increase was left unrevised at 5.9%.

Looking ahead, investors will receive the weekly MBA Mortgage Applications Index, the ADP Employment Change report for October, and the Q3 Employment Cost Index.

• Nasdaq Composite +3.7% YTD
• Dow Jones Industrial Average +0.6% YTD
• S&P 500 +0.3% YTD
• Russell 2000 -1.9% YTD

After Hours Summary: FEYE +6%, FB +3% are higher are higher, while DDD / CLVS / MDR -20%, IQ -13% are lower following earnings guidance, KEYS -2% on S&P 500 addition news

After Hours Gainers:

Companies trading higher in after hours in reaction to earnings/guidance: RBBN +18.9%, BEAT +9.9%, EXAS +8.7%, HABT +8.5%, RRD +7.5% (light volume), SSW +7.1%, AINV +6.2%, FEYE +6.2%, TX +4.7%, QNST +4.4%, YUMC +4.1%, WLL +4%, BJRI +3.9%, FB +3.1%, MRCY +2.8% (light volume), TENB +2.5% (light volume), ZEN +2.3%, TMUS +2%, CXO +1.7%, HLF +1.5%, GNW +1.2%, MGM +1.2%

Companies trading higher in after hours in reaction to news: KIN +17% (announces positive topline results for pilot effectiveness study of KIND-016), KMPH +14.2% (enters into license agreement with KVK Tech for the commercialization of APADAZ), ARNC +7.4% (on reports of Apollo Global [APO] M&A talks), CERC +7.1% (receives Rare Pediatric Disease Designation from FDA for CERC-801), MMI +6.9% (to join S&P SmallCap 600), GRMN +1.2% (ticking higher; Garmin, Mastercard and NXT-ID [NXTD] subsidiary Fit Pay, Inc. announce expansion of Garmin Pay conatactless payments to Maestro European accountholders), NWL +1.2% (ticking higher on reports the company is nearing deal to sell Jostens), PZZA +1% (following late surge higher on reports of competing interest from several PE firms), AMZN +1% / NFLX +0.9% / GOOGL +0.7% / AAPL +0.5% (following FB results)

After Hours Losers:

Companies trading lower in after hours in reaction to earnings/guidance: DDD -20.3%, CLVS -20.2%, MDR -20%, TCS -18.4%, IQ -13.4%, TTMI -10.9%, SFLY -10%, NANO -8.9%, PAYC -7.8%, NTRI -7.7%, EA -5.1%, SPWR -5.1%, MXIM -1.6%, BIDU -0.6%, EBAY -0.6%

Companies trading lower in after hours in reaction to news: TSRO -13.1% (following CLVS results), KEYS -2% (to join S&P 500), CIM -1.7% (ticking lower; declared unchanged dividend of $0.50/share)