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S&P 500 closes lower on trade concerns, but still ends month higher
31-Oct-19 16:20 ET
Dow -140.46 at 27046.27, Nasdaq -11.62 at 8292.36, S&P -9.21 at 3037.56

https://www.briefing.com/stock-market-update

[BRIEFING.COM] The S&P 500 lost 0.3% on this last day of October, as concerns about a comprehensive U.S.-China trade deal outweighed the positive earnings results from Apple (AAPL 248.76, +5.50, +2.3%) and Facebook (FB 191.65, +3.40, +1.8%).

The Dow Jones Industrial Average (-0.5%), Nasdaq Composite (-0.1%), and Russell 2000 (-0.7%) also finished lower, but an opportunistic mindset into the close helped stocks finish well off their session lows.

Many U.S. investors have already expressed skepticism that China would agree, and commit, to structural reforms in a complete trade deal, but it was discouraging to see a Bloomberg report indicating Chinese officials also having their own doubts. Economic data showing continued weakness in China's manufacturing sector didn't help sentiment, either.

Given the resiliency of the market, it was business as usual when the stock market opened the session relatively unchanged. This was short-lived, though, with the major indices quickly giving back Wednesday's post-FOMC gains. Coinciding with this decline was the release of the Chicago PMI for October, which fell deeper into contraction territory to 43.2 (Briefing.com consensus 48.2) from 47.1.

In turn, weakness primarily rested in the trade-and-growth sensitive areas of the market: The S&P 500 industrials (-1.1%), materials (-1.1%), financials (-0.6%), and energy (-0.5%) sectors. Conversely, the utilities (+0.5%) and communication services (+0.3%) sectors were the lone groups that finished in positive territory.

A risk-off mindset was also manifested in the rally in the U.S. Treasury market and the continued rotation out of growth stocks. Most notably, Twilio (TWLO 96.56, -11.14, -10.3%), Etsy (ETSY 44.49, -8.31, -15.7%), Wayfair (W 82.23, -18.85, -18.7%), and Lyft (LYFT 41.44, -2.67, -6.1%) posted sizable losses following their earnings reports.

The 2-yr yield dropped ten basis points to 1.52%, and the 10-yr yield dropped 11 basis points to 1.69%. The U.S. Dollar Index fell 0.4% to 97.30. WTI crude fell 1.6%, or $0.90%, to $54.18/bbl.

There were some encouraging developments for investors to consider, though. The S&P 500 found support at its previous closing high from July 26 (3025.86) three times today before closing above it. Some month-end rebalancing activity might have also exacerbated today's price action. The benchmark index rose 2.0% this month.

Reviewing Thursday's economic data:

Initial claims for the week ending October 26 increased by 5,000 to 218,000 (Briefing.com consensus 216,000). Continuing claims for the week ending October 19 increased by 7,000 to 1.690 million.
The key takeaway from the report is that there is nothing alarming in the initial claims trend, which continues to track close to historic lows.
Personal income was up 0.3% in September, as expected and personal spending was up 0.2% (Briefing.com consensus +0.3%). The PCE Price Index was unchanged m/m (Briefing.com consensus +0.1%) and up 1.3% yr/yr; the core PCE Price Index was unchanged m/m (Briefing.com consensus +0.1%) and up 1.7% yr/yr.
The key takeaway from the report is that the data fit reasonably well with the Fed's working view that the U.S. economy is growing at a moderate pace with muted inflation pressures.
The Q3 Employment Cost Index increased 0.7%, as expected, seasonally adjusted, for the three-month period ending in September 2019 after increasing 0.6% for the three-month period ending in June 2019. Wages and salaries, which account for about 70% of compensation costs, rose 0.9%, while benefit costs, which make up the remainder of compensation costs, increased 0.6%.
The key takeaway from the report is that it shows a continuation of moderate growth in compensation costs.
Chicago PMI for October fell to 43.2 (Briefing.com consensus 48.2) from 47.1, sinking deeper into contraction territory.

Looking ahead, investors will receive the Employment Situation Report for October, the ISM Manufacturing Index for October, the Construction Spending report for September, and auto and truck sales throughout the day on Friday.

Nasdaq Composite +25.0% YTD
S&P 500 +21.2% YTD
Dow Jones Industrial Average +15.9% YTD
Russell 2000 +15.9% YTD

Market Snapshot
Dow 27046.27 -140.46 (-0.52%)
Nasdaq 8292.36 -11.62 (-0.14%)
SP 500 3037.56 -9.21 (-0.30%)
10-yr Note +30/32 1.683
NYSE Adv 1086 Dec 1765 Vol 1.2 bln
Nasdaq Adv 1148 Dec 1952 Vol 2.0 bln

Industry Watch
Strong: Utilities, Communication Services
Weak: Industrials, Materials, Financials, Energy

Moving the Market

-- Stock market closes slightly lower amid concerns about comprehensive trade deal, weak manufacturing data, month-end rebalancing activity

-- Relative weakness in the cyclical sectors and trade-sensitive areas

-- Apple (AAPL) and Facebook (FB) rise on positive quarterly results

-- U.S. Treasury yields dropped on weak Chicago PMI, trade and growth concerns