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THE GIST (“THE WHAT”)
Surprisingly strong jobs report and trade optimism powered the S&P 500 index to notch a fresh all-time high. Surging at the open and flirting with record highs throughout the session, the index closed near session highs at 3066.91, up 29.35 points and gaining 0.97% over previous session’s close. Industrials, Materials and Technology stocks outperformed alongside rising yields and a weakening U.S. Dollar while Energy stocks led the day’s strong gains as oil prices surged amid trade optimism.
THE DETAILS (The “How & Why”):
Investors cheered an unexpected jump in jobs numbers that followed a stronger-than-expected GDP reading for the third quarter. U.S. economy added 128,000 jobs in October, well-above the expected reading of 85,000, despite the strike at General Motors that had chipped away the payroll numbers by close to 42,000. Jobs numbers for the prior two months were also revised higher by up to a total of 95,000.
China also reported a third straight month of economic expansion with its Markit Manufacturing Purchasing Managers’ Index rising to 51.7 as against the expected decline to 51. A weaker-than-expected U.S. manufacturing data did little to dampen sentiment. The ISM manufacturing data, however, gave further signs of contraction, coming in at a 48.3 compared to the expected reading of 49.0, as factories continue holding off their further investment plans in the face of trade uncertainty.
On the trade front, reports that both the disputing sides have “reached consensus on principles” eased tensions, further supporting gains. Investors gave up safety of bonds in favor of risky equity assets, sending yields higher across maturities. The 10-year Treasury yield settled 3.6 basis points higher at 1.727%.
China-exposed stocks rallied on trade optimism. U.S. Dollar extended its slide, further lifting trade-sensitive stocks. Industrials, Materials and Technology outperformed the broader index, closing sharply higher by 2.21%, 1.45% and 1.22%, respectively. Airlines, transportation and equipment manufacturers were all higher across the board.
Qorvo Inc. rocketed 20.23% to an 18-year high on delivering a surprisingly strong growth in its 5-G wireless business. Skyworks Solutions Inc. also soared 7.95% amid optimism around its 5-G business. Fortinet Inc., Apache Corp and Newell Brands Inc. were the other strong gainers of the session, soaring 10.51%, 9.93% and 8.59%, respectively.
Meanwhile, oil prices climbed more than 3% on improving outlook of global economic growth and a decline in U.S. rig count. Energy sector posted the biggest percentage gain of the session, up solidly by 2.51%. Apache Corp. topped the gains within this space, soaring 9.93% following reports that the oil producer plans to cut out on capital spending in a bid to improve profitability. Helmerich & Payne Inc. and Schlumberger Ltd also surged more than 5% apiece.
With rising risk appetite and climbing yields, defensive stocks lagged the broader gains. Utilities and Real Estate stocks were the only sectors closing slightly lower for the day. Disappointing fourth-quarter outlook by Arista Networks sparked a slew of stock downgrades by several analysts after it tanked 24.23%, despite a solid third-quarter performance. The computer networking company suffered a worst meltdown on record amid reports of softening business from a ‘cloud titan’ customer.