Stock Market Update

[BRIEFING.COM] The stock market is in rally-mode ahead of today's election results after the close. Buying interest is broad based, leading the S&P 500, Nasdaq Composite, Dow Jones Industrial Average, and Russell 2000 to trade more than 1.0% higher. 

The upside bias follows a jump in the ISM Services PMI for October that should bode well for economic and earnings growth. Upside moves also reflect relief that some unknowns about the election will be cleared up before trading begins on Wednesday. The market hasn't seemed bothered by the idea that other unknowns may still remain in play due to the extended time it takes in some states to count votes for House races and due to the possibility of recounts.

Treasury yields are higher after the data. The 10-yr yield is up two basis to 4.33% and the 2-yr yield is up four basis points to 4.22%. 

Many stocks are participating in upside moves. The equal-weighted S&P 500 sports a 0.9% gain and all 11 S&P 500 sectors trade up. The consumer discretionary and information technology sectors lead the pack, up 1.9% and 1.5%, respectively, thanks to gains in mega cap components. 

Other mega caps are also trading up, boosting the broader equity market. The Vanguard Mega Cap Growth ETF (MGK) shows a 1.4% gain. 

Reviewing today's economic data:

• The September Trade Balance Report at 8:30 a.m. ET showed a widening in the trade deficit to $84.4 billion (Brieifng.com consensus -$74.0 billion) from a revised $70.8 billion (from -$70.4 billion) in August. That widening was the result of exports being $3.2 billion less than August exports and imports being $10.3 billion more than August imports.
  • The key takeaway from the report is that the imbalance between exports and imports is indicative of a U.S. economy that is running stronger than its global counterparts.
• The S&P Global US Services PMI declined to 55.0 in the final October reading from 55.2.
• The ISM Services PMI increased to 56.0% in October (Briefing.com consensus 53.5%) from 54.9% in September. That is the highest reading since July 2022. The dividing line between expansion and contraction is 50.0%, so the October reading reflects services sector activity accelerating from September.
  • The key takeaway from the report is that the pace of expansion in the largest sector of the U.S. economy accelerated to a two-year high with employment activity returning to expansion after a brief contraction in September. The Backlog Index showed a deepening contraction, which could slow the pace of expansion in the coming months.