Note: Our daily “S&P 500 Outlook, Forecast, and Trading plan for Thursday, 11/01” will be posted around 8:30am EDT, Thursday.

THE GIST (“THE WHAT”)

Closing the worst month since September 2011, now famously called as a ‘Red October’, on a positive note, the S&P 500 index extended its rebound for the second day in a row. Better-than-expected results by Facebook Inc. helped lift optimism at the open, further boosted by an upbeat Jobs report.

Gapping higher at the open, the index maintained the gains throughout the session, but was pulled back in the last hour of trading to close off of session highs at 2711.74, up 29.11 points and gaining 1.09% over previous day’s close. Technology led today’s rally, overshadowing weakness within the defensive sectors. 
Earnings season failed to lift confidence in investors spooked with concerns of a slowing global economy, rising domestic interest rates and unresolved U.S. – China trade tensions. While the previous two session’s rally helped trim some of the steep losses, the month, however ended with 7.31% loss, causing a major technical damage as the index gave up its key technical support level of 200 DMA and fell closer to a correction territory for the second time this year.

THE DETAILS (The “How & Why”):

Technology sector led the index higher, up sharply by 2.39%. The closely watched quarterly results of Facebook Inc. helped boost sentiment within the FANG stocks after topping earnings estimates but falling short on revenue. The social-media giant rose 3.81% as investors cheered on forward-looking commentary provided by its management. FleetCor Technologies Inc. was the top gainer within the sector, up 7.98% after reporting solid quarterly results.
Among the other strong gainers were Advanced Micro Devices Inc. and eBay Inc., both up 5.87% each. The broader Technology sector shed 8.49% this month with some of the large-cap tech stocks worst hit on concerns that high-valuations of these beloved stocks could be revalued in the rising interest rate environment. Investors will be keenly looking forward to the quarterly earnings results of Apple Inc. and its sales guidance after-session tomorrow, expecting a 34% increase in its earnings and a 17% increase in revenue.
Communication Services and Consumer Discretionary were the other strong performers, up 2.10% and 1.63% respectively. General Motors Co. soared 9.09% on reporting strong quarterly earnings driven by higher auto prices. Retail and department chain stocks showed resilience in this brutal month ahead of the holiday season. While Amazon.com Inc. and Netflix Inc. gained 4.42% and 5.59% in today’s rally, they we
re amongst the worst decliners this month, falling 18.94% and 19.98% respectively.
Treasury yields edged up following an upbeat jobs data indicating that the private sector continues to hire at a strong pace, boosting the broader Financials sector by 1.43%. Bank stocks got a further lift on news that the Federal Reserve plans to relax some of the regulations for banks with less than $700 billion in assets.
Materials and Industrials sectors were the other modest gainers, extending their previous session’s gains by 1.35% and 0.82% on easing of trade tensions after President Trump announced his willingness to renegotiate trade deal with China. These sectors were among the worst decliners this month, shedding 10.82% and 11.82% on concerns that the trade tensions between the U.S. and China has started cutting into the profit margins of large multinational corporates within these trade-sensitive sectors.
With a rise in the investor’s risk-appetite in today’s strong rally, defensive sectors gave up some of their gains. Real Estate, Utilities and Consumer Staples shed 1.37%, 1.15% and 0.86% respectively. Amid a sharp correction this month in the broader index, Consumer Staples and Utilities were the only sectors holding gains, up 1.56% and 0.92% on a monthly-basis as investors preferred value over growth in times of uncertainty around trade and interest rates.