Daily Market Recap

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The S&P 500 gained 1.34% for the day, 0.51% for the week, and the Dow was higher by 1.08%. The advance today matched the retreat yesterday on a percentage basis. October nonfarm payrolls came in above estimates (204,000 versus the estimate of 100,000) and was released prior to the open. The immediate impact was a fear that the number was too high and this would put Fed tapering talk back on the table. A quick retreat in the futures market was reversed and the market opened higher and gained strength throughout the day. The action in the market today was the exact opposite of yesterday’s trading.

Leading areas were consumer discretionary, health care, energy, financials, industrials, airlines, and materials. The risk-off interest rate sensitive areas of the market like consumer staples, telecom services, and utilities were laggards. Technology also lagged the broad market averages today.

The market again displayed resiliency as leadership rotates to new sectors on a rapid basis. While the media has been fixated on a handful of social media IPO’s, investors rotated into industrials and financials aggressively today. The better than expected jobs data helped the financials as their net interest margins improve in the event that interest rates rise.

While some took the increased talk of a Fed tapering as a negative, many saw this as a catalyst for acceleration of the rotation from bonds into equities.

Financials were aggressively higher in response to the jobs data. This area soared ahead of the anticipated end of tapering announcement a few months ago and sold off after the Fed announced no change to the plan. When tapering begins it would lead to a steepening of the yield curve and improved margins for financials. Charles Schwab and E*Trade were leaders in the discount brokerage space. Buying regional banks was particularly aggressive. The bank index soared 3.4% on the day.

Biotechnology had come under pressure the past few days as investors took profits in the face of increased volatility. Biotechs roared ahead 3.9% today bouncing off technical support levels. Investors aggressively bought one of the few pullbacks in the group.

Industrials were strong as the cyclicals were in favor today. Multi-line industrials were strong all day and saw buying increase in the final hour of trading. Danaher was a standout on speculation of a potential acquisition benefiting their growing healthcare business. Capital equipment names were also in favor.

Airlines led the transports higher. AMR released better than expected data today and gained 4%. AMR is up more than 30% for the month. Truckers rebounded after some companies in the group reported weaker than expected earnings. The group benefitted from the stronger than expected macro numbers and a continued decline in fuel prices.

Source: PFS Group

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