Stocks Close Higher Prior to U.S. Presidential Election…..

U.S. stocks were higher in the first trading session of November, as the broader market gains helped alleviate some of last week’s pressure ahead of tomorrow’s presidential election. Stronger-than-expected global October manufacturing reports, highlighted by a two-year high in the U.S. ISM Manufacturing Index, helped stabilize the markets as investors prepared for the busy week ahead. Tomorrow’s aforementioned presidential election, the Fed’s monetary policy decision and the October nonfarm payroll report all appear poised to garner the bulk of the attention later this week, as volatility is likely to remain high. In corporate news, Clorox and Estee Lauder both topped earnings expectations, while Dunkin’ Brands agreed to be taken private by Inspire Brands for about $11.3 billion. Treasury yields were lower as bond prices moved higher, and the U.S. dollar was little changed. Gold rose and crude oil prices gained. Asia finished higher and Europe also recovered from last week’s drop.

The Dow Jones Industrial Average rose 423 points (1.6%) to 26,925, the S&P 500 Index was up 40 points (1.2%) at 3,310, and the Nasdaq Composite advanced 46 points (0.4%) to 10,958. In moderately-heavy volume, 890 million shares were traded on the NYSE and 3.2 billion shares changed hands on the Nasdaq. WTI crude oil was $1.02 higher at $36.81 per barrel and wholesale gasoline added $0.02 to $1.05 per gallon. Elsewhere, the Bloomberg gold spot price rose $16.54 to $1,895.35 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was little changed at 94.07.

Manufacturing stronger than expected to kick off busy week…..

The October Institute for Supply Management (ISM) Manufacturing Index showed manufacturing output jumped further into expansion territory (a reading above 50). The index rose to 59.3 from September’s unrevised 55.4 level, and versus the Bloomberg forecast of 56.0. The index hit the highest level since September 2018 as new orders jumped 7.7 points to 67.9, production growth increased 2 points to 63.0 and employment moved back above the key 50 mark. Prices continued to heat up, increasing 2.7 points to 65.5.

The ISM said, “Manufacturing performed well for the third straight month, with demand, consumption and inputs registering growth indicative of a normal expansion cycle. While certain industry sectors are experiencing difficulties that will continue in the near term, the overall manufacturing community continues to exceed expectations.”

The final October Markit U.S. Manufacturing PMI Index was revised slightly higher to 53.4 from the preliminary level of 53.3, where it was forecasted to remain, and modestly above September’s 53.2 level. A reading above 50 denotes expansion. The release is independent and differs from ISM’s report, as it has less historic value and Markit weights its index components differently, while it surveys a wider range of companies.

Construction spending increased 0.3% month-over-month (m/m) in September, versus projections of a 1.0% gain, and following August’s downwardly-revised 0.8% increase. Residential spending grew 2.7% m/m but non-residential spending fell 1.6%.

Treasuries were mostly higher, with the yield on the 2-year note little changed at 0.16%, while the yield on the 10-year note was down 2 basis points (bps) to 0.85% and the yield 30-year bond declined 3 basis to 1.63%.

Bond yields have edged higher as of late amid the backdrop of mostly positive economic data, solid earnings reports, and as inflation expectations have shown signs of warming up a bit. However, the resurgence of new COVID-19 cases has fostered some economic uneasiness, political uncertainty remains elevated ahead of tomorrow’s key presidential election and the Fed has continued to stress that it will keep rates lower for as long as it takes to foster the recovery.

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