Before The Bell
Stocks got off to a fast start when the opening bell rang on the first day of trading in November and ended mostly strong, if a bit off their best levels of the session.
Investors apparently were looking to capitalize on the likelihood of a bounce back from recent waves of selling on Wall Street. The Dow Jones Industrial Average fell in both September and October, months that have often provided tough sledding for the market.
There is also evidence that stocks tend to rally into yearend, suggesting some of the bearishness that came to the forefront in recent weeks could be past.
Helping matters to a degree was a report that showed U.S. construction spending edged higher in September, mostly on strength in the residential sector. The housing boom initiated by ultralow interest rates is a clear plus in that regard. A drop in non-residential spending offset the good news somewhat, though.
An even more bullish indicator was the ISM manufacturing index for October that came in well ahead of expectations. The data pointed to continued gains in the manufacturing economy, which was welcome news for investors.
In a shift, the day’s action showed less enthusiasm for shares of companies offering technologies that make it easier to work from home.
Instead, sectors such as industrials, energy, and materials, outperformed. There was also a sense that stocks of smaller-cap companies would benefit the most if Congress passes a stimulus package. There is optimism that, after Election Day passes today, negotiations will have a chance to move ahead.
To be sure, Wall Street has a lot to sort through. Although the earnings season now moving into its later stages has gone pretty well, investors have concerns about 2021 corporate profits.
That is particularly true with the recent rise in coronavirus cases. If lockdowns or partial shutdowns were to become more commonplace, and state and local government act to contain the spread of sickness, businesses could experience more difficult times.
No doubt, the Federal Reserve will keep interest rates at levels highly supportive of the economy when its policy-setting committee meets this week.
At the close of trading, the Dow Jones Industrial Average turned in an impressive 423-point gain; the S&P 500 rose a sizable 40 points; but the tech-heavy NASDAQ only moved up 46 points, or much less on a percentage basis than the Dow or the S&P. Elsewhere, the small-cap Russell 2000 rode a nice rally higher.
- Robert Mitkowski
At the time of this writing, the author did not have positions in any of the companies mentioned.
