By William Watts and Sunny Oh
ISM manufacturing rises to 13-month high
U.S. stock-market benchmarks were solidly higher at noon Monday, bouncing back after an ugly finish to October, with support tied to upbeat global economic data on the eve of Election Day, as markets continue to monitor rising COVID-19 cases and a stream of corporate earnings results.
The Dow Jones Industrial Average climbed 418 points, or 1.6%, to 26,921. The S&P 500 rose 1.2% to 3,309. The Nasdaq Composite added 0.3% to 10,948, lagging the gains of their peer benchmarks.
Stocks ended lower Friday, capping a losing week and month for major indexes. The Dow fell 4.6% last week, leaving the blue-chip gauge with a monthly loss of 6.5% — its largest since March. The S&P 500 saw a 5.6% weekly loss, leaving it down 2.8% for the month; the Nasdaq Composite suffered a 5.5% weekly fall, leaving it down 2.3% in October.
Last week’s declines for the Dow, S&P 500 and Nasdaq were the largest since March.
Equities were enjoying an upbeat tone ahead of Tuesday’s U.S. elections as investors took heart in positive economic data from across the world. Still, worries of a drawn-out ballot count and an unclear election outcome this week remained the biggest risk to markets, analysts said.
A final Wall Street Journal/NBC News poll published Sunday showed Democratic challenger Joe Biden holding a 10 percentage point lead (link) — 52% to 42% — over President Donald Trump. Biden’s lead was essentially unchanged from an 11-point lead seen in mid-October, but the survey did portray a tightening race in battleground states that could determine the outcome in the electoral college.
“As both candidates will opt for big increases in fiscal spending over the coming months, investors don’t seem too bothered about who will win. The markets will prefer a clear outcome — although this may not be the case,” said Fawad Razaqzada, market analyst at ThinkMarkets, in a note.
He said a contested outcome “could trigger a big selloff for stocks and other risk assets, and send safe haven dollar and yen higher,” he said.
Meanwhile, analysts said upbeat economic data appeared to bolster equities on Monday.
The IHS Markit final U.S. manufacturing index rose to 53.4 in October versus an initial reading of 53.3. And the Institute for Supply Management’s (link) more closely watched manufacturing activity index climbed to a 13-month high of 59.3 last month from 55.4 in September. Readings over 50 indicate growth.
The positive data represented “good news for equity markets, particularly for cyclical sectors that have lagged technology names in recent months,” said Jim Baird, chief investment officer for Plante Moran Financial Advisors.
Outside the U.S., the Caixin manufacturing purchasing managers index, a gauge of activity in China’s manufacturing sector, rose in October — a positive sign for domestic demand that provided a lift to Asian markets (link) early Monday. It was a similar story in Europe (link) after upbeat PMI readings.
Last week’s selloff was tied in large part to a surge in COVID-19 cases that triggered new restrictions on activity in European countries and stoked worries about the fate of the U.S. economic recovery.
The U.S. recorded 81,400 new cases on Sunday, a slight increase from the previous day, but down from the record seen late last week, The Wall Street Journal reported (link), citing data from Johns Hopkins University. The seven-day average of new cases continues to exceed the 14-day average in most states, the newspaper reported, indicating a continued acceleration in the spread of the virus.
Investors face another torrent of corporate results in the week ahead, with 128 S&P 500 companies due to issue results. Earnings for the S&P are set to decline for a third straight quarter as they deal with the pandemic, but the drop appears set to be less drastic than initially feared.
After last week’s barrage of earnings, including strong results from technology heavyweights, FactSet said its model now looks for a 9.8% blended profit decline (link)for the S&P 500 versus its initial call for a 20.5% drop before the start of earnings season.
The yield on the 10-year Treasury note (link) fell 2 basis points to 0.84%. Yields and bond prices move in opposite directions.
The pan-European Stoxx 600 Europe rose 1.6%, while London’s FTSE 100 stock index gained 1.4%.
Oil futures (link)rebounded, with the U.S. benchmark rising 1.3% to $36.26 a barrel on the New York Mercantile Exchange. Gold found support (link), with the December contract up 0.8% to $1,893.90 an ounce.
The ICE U.S. Dollar Index , a measure of the currency against a basket of six major rivals, was up 0.1%.
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-William Watts; 415-439-6400; AskNewswires@dowjones.com
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