Stocks traded higher from the open today and after a mid-day fade closed near the highs for the day. There was a Financial Times article that said Spain is ready to request a bailout that sparked things early. Also, while still early in the process, Q3 earnings reports and forward guidance has been better than expected. The S&P 500 closed up 1.03%, the Dow was up 0.95% and the NASDAQ closed 1.21% higher, just above its 50 day moving average.
Cyclical issues outperformed today as investors were more willing to take on risk. Materials, tech and the financial sectors outperformed. Telecom and utilities were laggards on the day. Citigroup traded higher after the shock resignation of Vikram Pandit. He participated in their quarterly conference call yesterday and it was announced today that he was no longer the CEO. Details were sketchy and I am sure information will be leaking out about the situation in the days ahead.
Roughly 10% of the S&P 500 has reported quarterly numbers. On average so far, earnings have exceeded analyst expectations by just over 6%. If you add up earnings expectations for all the companies in the S&P 500 from the bottom-up, the total is roughly $10 more than the average of strategist’s expectations for the index from the top down. As long as actual earnings came come in above strategist numbers, valuations for stocks will remain attractive.
The National Association of Home Builders (NAHB) survey for October showed continued improvement. The measures of prospective buyer traffic, present sales and expected sales all increased. Industrial production increased 0.4% in September after a drop of better than 1% in the prior month.
The technology sector outperformed the broader market for the first time in quite a while. Sellers abated today ahead of key tech earnings announcements from tech giants Intel and IBM. Semiconductors had their best day in over a month.
The industrial sector performed roughly in line with the market. Large multi-industry names were strong. Late stage cyclicals were particularly strong. Machinery and capital equipment names in the sector were the leaders, trading up between 2% and 3%.
The transports traded higher than the overall market. Railroad stocks were particularly strong. Industry leader Union Pacific was up better than 2%. Truckers and parcel delivery names traded higher and the airlines lagged the overall sector.
Materials were an area of strength today. Base metals and chemical stocks traded higher. The CEO of Freeport-McMoRan made positive comments about business trends with China. These comments had a positive impact on steel and copper names.
The second Presidential debate will be held tonight.
Source: PFS Group
