Market Perspective for November 5, 2018

Strong economic data drove bargain buying on Monday. Healthcare, financials, consumer staples and energy led the market higher. The S&P 500 Index gained 0.56 percent. SPDR Financials (XLF) climbed 1.52 percent, SPDR Energy (XLE) 1.73 percent, SPDR Consumer Staples (XLP) 1.25 percent and SPDR Healthcare (XLV) 0.89 percent.

Historically, stocks have rallied strongly in the wake of an election. Given the decline in October, odds favor another strong recovery this year.

Both services PMIs beat expectations in October. The ISM survey declined slightly from September, but that month’s reading was at a 21-year high. The Job Openings and Labor Turnover Survey (JOLTS), consumer credit and wholesale inventories for September, the producer price index (PPI) for October and the University of Michigan’s flash consumer sentiment reading for November will all be available this week.

Overseas, Europe will report its services PMI on Tuesday. Canada will report housing starts for October on Thursday. Australia will report home loans for September this week as well. Both countries’ housing markets will be in focus as Chinese real estate demand dwindles. China will report trade figures on Thursday, as well as consumer and producer inflation, new loans and money supply growth.

The 10-year Treasury yield held at 3.2 percent on Monday. It saw early selling but staged a rally late in the day as stocks advanced. Rising yields weighed on utilities and real estate.

The Federal Reserve will meet on Wednesday. No rate hike is expected until the December meeting.

The U.S. Dollar Index started the week with a small loss as it consolidates a one-month rally. Some currencies such as the Australian dollar have rallied strongly, signaling a potentially larger pullback. The U.S. Dollar Index has gained 8 percent since April without a meaningful correction. SPDR S&P 500 (SPY) gained 0.58 percent on Monday, besting both its developed-market and emerging-market competition.

Crude oil finished with a small loss on Monday as it fell to $62.79 per barrel. Natural gas, however, jumped 8 percent after forecasters predicted freezing temperatures for the Northeast.

Qualcomm (QCOM), Twenty-First Century Fox (FOXA), Southern Company (SO), Humana (HUM), Prudential (PRU), Keurig Dr. Pepper (KDP), Square (SQ), Walt Disney (DIS), Johnson Controls (JCI), Nutrien (NTR), Eli Lilly (LLY), CVS Health (CVS), Emerson Electric (EMR), Becton Dickinson (BDX), Devon Energy (DVN), CA Inc (CA), DISH Network (DISH), Cars.com (CARS), Activision Blizzard (ATVI), CenturyLink (CTL), AstraZeneca (AZN), Cardinal Health (CA), Dropbox (DBX), CRISPR Therapeutics (CRSP) Crocs (CROX), athenahealth (ATHN), and Starwood Property (STWD) are set to report earnings this week.

 

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