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Cyclical sectors paced the rebound effort
02-Nov-20 16:15 ET
Dow +423.45 at 26924.99, Nasdaq +46.02 at 10957.54, S&P +40.28 at 3310.24

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

[BRIEFING.COM] The S&P 500 advanced 1.2% on Monday in a cyclically-led rebound. The value-oriented Dow Jones Industrial Average (+1.6%) and Russell 2000 (+2.0%) outpaced the benchmark index, while the Nasdaq Composite (+0.4%) underperformed amid relative weakness in the mega-cap/growth stocks.

Last week was the worst week for the market since March, and investors viewed the weakness as a good time to buy the dip. Money appeared to disproportionately flow into the cyclical stocks in part due to the better-than-expected ISM Manufacturing Index for October, which checked in at 59.3% (Briefing.com consensus 55.7%), versus 55.4% in September.

The energy sector rose 3.7% amid a turnaround in crude futures ($36.79, +1.09, +3.1%), which were down 5% from Friday's settlement price after several European countries announced renewed lockdowns. The materials (+3.4%), industrials (+2.7%), and financials (+1.9%) sectors were other notable gainers.

At the other end, the information technology (+0.3%), consumer discretionary (+0.3%), and communication services (+0.1%) sectors struggled to keep pace due to renewed selling pressure in their mega-cap components, which were also among the weakest performers last week.

Note, the session high for the S&P 500 was set in the first hour of trading. The lack of follow-through buying suggested that the market retained a wait-and-see mindset for the presidential election tomorrow. News that Massachusetts announced a stay-at-home order might have also tempered gains in the cyclical stocks.

In earnings news, Clorox (CLX 216.03, +8.78, +4.2%) was a clear winner as the company continued to benefit from strong demand caused by the pandemic. In addition to beating revenue estimates, the company guided FY21 revenue above consensus.

U.S. Treasuries finished mixed and little changed. The 2-yr yield increased one basis point to 0.16%, and the 10-yr yield declined one basis point to 0.85%. The U.S. Dollar Index finished little changed at 94.06.

Reviewing Monday's economic data:

The ISM Manufacturing Index for October checked in at 59.3% (Briefing.com consensus 55.7%), which is an improvement from 55.4% in September and the highest level since September 2018. The dividing line between expansion and contraction is 50.0%.
The key takeaway from the report is the understanding that the New Orders Index hit its highest level (67.9%) since January 2004, signaling that the recovery in the manufacturing sector is running at a fast pace still despite the lack of a new stimulus package, the election uncertainty, and the new wave of coronavirus cases in the U.S. and Europe.
Total construction spending increased 0.3% m/m in September (Briefing.com consensus +0.9%) on the heels of a downwardly revised 0.8% increase (from +1.4%) in August. Total private construction spending rose 0.9% m/m and total public construction spending declined 1.7%.
The key takeaway from the report is that residential construction spending is healthy and the main driver behind total construction spending increasing 1.5% year-over-year.

Looking ahead, investors will receive Factory Orders for September and auto and truck sales for October on Tuesday.

Nasdaq Composite +22.1% YTD
S&P 500 +2.5% YTD
Dow Jones Industrial Average -5.7% YTD
Russell 2000 -6.0% YTD

Market Snapshot
Dow 26924.99 +423.45 (1.60%)
Nasdaq 10957.54 +46.02 (0.42%)
SP 500 3310.24 +40.28 (1.23%)
10-yr Note +3/32 0.852
NYSE Adv 2229 Dec 789 Vol 890.1 mln
Nasdaq Adv 2301 Dec 1125 Vol 3.2 bln

Industry Watch
Strong: Energy, Materials, Industrials, Financials
Weak: Consumer Discretionary, Information Technology

Moving the Market

-- Buy-the-dip activity following the worst week since March, except in the mega-caps

-- Cyclical/value stocks outperform

-- ISM Manufacturing Index for October increased to 59.3% (Briefing.com consensus 55.7%) from 55.4% in September.

WTI crude futures rebound 3%
02-Nov-20 15:25 ET
Dow +440.05 at 26941.59, Nasdaq +16.63 at 10928.15, S&P +38.02 at 3307.98

[BRIEFING.COM] The S&P 500 is up 1.1% amid gains across all 11 of its sectors.

Briefly recapping the sector performances, today belongs to the energy (+4.5%), materials (+3.7%), industrials (+2.8%), and financials (+2.2%) sectors. The communication services (+0.03%), consumer discretionary (+0.1%), and information technology (+0.1%) sectors cling onto fractional gains.

WTI crude futures settled higher by 3.1%, or $1.09, to $36.79/bbl.