Stock Market Update

[BRIEFING.COM] The stock market was in rally-mode today, aided by falling interest rates, positive earnings news, and short covering activity. The Russell 2000 registered a 2.5% gain while the three main indices closed with gains ranging from 1.7% to 1.9%. The S&P 500 closed above its 200-day moving average (4,244) and the 4,300 level. 

The 10-yr note yield fell another 12 basis points today to 4.67% while the 2-yr note yield rose one basis point to 4.98%. The drop in long term rates was aided by some softening manufacturing PMI data out of the eurozone, the Bank of England's decision to keep its Bank Rate unchanged at 5.25%, some short-covering activity in the Treasury market as well, and the Q3 productivity report showing a 0.8% decline unit labor costs.

Just about everything came along for the rally in the stock market. 29 of the 30 Dow components settled with a gain and all 11 S&P 500 sectors closed in the green. The energy (+3.1%) and real estate (+3.1%) sectors jumped more than 3.0% while the communication services sector (+0.9%) saw the slimmest gain.

Reactions to earnings news was generally positive, which acted as added support for the broader market. Qualcomm (QCOM 117.36, +6.47, +5.8%), Eli Lilly (LLY 580.29, +25.83, +4.7%), and Starbucks (SBUX 100.01, +8.66, +9.5%) were winning standouts in that respect.

Meanwhile, Airbnb (ABNB 115.50, -3.97, -3.3%) and Moderna (MRNA 71.23, -4.97, -6.5%) traded down after reporting earnings.

Other factors in play today included the notion that the Fed could be done raising rates, which followed remarks made yesterday by Fed Chair Powell at his press conference after the FOMC meeting, and the seasonality factor. November, on average, has historically been the strongest month for the S&P 500 and marks the start of the best six month return period for the S&P 500.

• Nasdaq Composite: +27.0% YTD
• S&P 500: +12.5% YTD
• Dow Jones Industrial Average: +2.1% YTD
• S&P Midcap 400: +0.02% YTD
• Russell 2000: -2.7% YTD

Reviewing today's economic data:

• Weekly Initial Claims 217K (Briefing.com consensus 214K); Prior was revised to 212K from 210K; Weekly Continuing Claims 1.818 mln; Prior was revised to 1.783 mln from 1.709 mln
  • The key takeaway from the report is much the same, which is to say the low level of initial claims isn't consistent with a material weakening in the labor market.
• Q3 Productivity-Prel 4.7% (Briefing.com consensus 3.6%); Prior was revised to 3.6% from 3.5%; Q3 Unit Labor Costs-Prel -0.8% (Briefing.com consensus 1.5%); Prior was revised to 3.2% from 2.2%
  • The key takeaway from the report, other than the impressive uptick in productivity, is the decline in unit labor costs. It is a particularly timely piece of data, as it plays perfectly into the market's swelling expectation that moderating inflation pressures will keep the Fed from raising rates again.
• September Factory Orders 2.8% (Briefing.com consensus 1.0%); Prior was revised to 1.0% from 1.2%
  • The key takeaway from the report is that factory orders in September were boosted nicely by strength in transportation orders, but the increase wasn't just a transportation story.

Friday's economic calendar features:

• 8:30 ET: October Nonfarm Payrolls (Briefing.com consensus 175K; prior 336K), Nonfarm Private Payrolls (Briefing.com consensus 143K; prior 263K), Average Hourly Earnings (Briefing.com consensus 0.3%; prior 0.2%), Unemployment Rate (Briefing.com consensus 3.8%; prior 3.8%), Average Workweek (Briefing.com consensus 34.3; prior 34.4)
• 9:45 ET: Final October S&P Global US Services PMI (prior 50.1)
• 10:00 ET: October ISM Non-Manufacturing Index (Briefing.com consensus 53.0%; prior 53.6%)