Source: The Wall Street Journal
Most indexes posted solid gains in October, fueled by earnings, central bank measures
The Dow Jones Industrial Average pushed back into positive territory for 2015 for the first time since July, erasing a deep summer slump and leaving all of the main U.S. stock indexes in the black.
The Dow rose 165.22 points, or 0.9%, to 17828.76, and is now up 0.03% for the year. The last time the blue-chip index closed with a 2015 gain was on July 22.
The S&P 500 advanced 24.69 points, or 1.2%, to 2104.05, leaving it 2.2% higher for the year. The Nasdaq Composite climbed 73.40 points, or 1.5%, to 5127.15 and is now up 8.3% in 2015.
The gains signal an easing of concerns about Chinese growth and the stability of emerging markets that sank stocks in August and September. U.S. growth remains sluggish, but solid earnings by some major companies and the continuation of loose monetary policy from major central banks have lifted markets.
Monday was “a decent move on decent volume,” said Gordon Charlop, managing director at Rosenblatt Securities. “It’s been pretty much green across the landscape.”
Energy stocks in the S&P 500 rose the most, up 2.4%. Chevron shares increased $4.08, or 4.5%, to $94.96, and Exxon Mobil added 2.54, or 3.1%, to 85.28.
The S&P’s health-care sector rallied 2%, notching the second-best performance. Pfizer rose 1.24, or 3.7%, to 35.06.
While health-care stocks have been hit by political scrutiny of drug pricing in recent months, many investors say certain companies in the sector can continue to deliver strong earnings growth, which should boost shares in the long run.
“In a world where global growth is likely to remain positive but muted, we’re still looking for opportunities in sectors like health care that can deliver even without a major economic upswing,” said Stephen Parker, a portfolio manager at J.P. Morgan Private Bank. He said he added to some of his health-care positions during the pullback.
U.S. biotech company Dyax rose 7.82, or 28%, to 35.35 after Shire said it struck an all-cash deal for Dyax valued at as much as $6.5 billion.
Separately, U.S.-listed shares of Valeant Pharmaceuticals International rose 6.70, or 7.2%, to 100.47 after short selling firm Citron Research offered no new allegations against the company in an updated report on Monday. Valeant shares slumped in the wake of an October report from Citron that questioned its business practices. Valeant has defended its accounting.
Investors also looked ahead to the U.S. government’s jobs report for October, due Friday, as they continue to bet on when the Federal Reserve will raise short-term interest rates. The Fed considers the strength of the labor market and the level of inflation as it debates monetary policy.
“With that looming employment report…a lot of people are just nibbling and waiting for that number to come out before making major bets,” said Larry Peruzzi, director of international trading at Cabrera Capital Markets.
Economists surveyed by The Wall Street Journal expect that employers added 183,000 jobs in October, up from 142,000 jobs in September. The unemployment rate is forecast to slip to 5% from 5.1%.
“If we do get a good jobs number…that will probably raise the odds of a liftoff in December,” said Mark Luschini, chief investment strategist at Janney Montgomery Scott.
On Monday, the Institute for Supply Management’s gauge of U.S. manufacturing activity slipped to 50.1 in October, from 50.2 in September. That was the weakest since May 2013 and barely above the 50 level that separates expansion from contraction.
Still, new orders came in at a faster pace, offering an encouraging sign for the manufacturing sector, said Alan Gayle, director of asset allocation at RidgeWorth Investments, which manages $40 billion.
In the bigger picture, “if we see continued improvement in the domestic economy and dollar strength, then that suggests the lagging small-cap sector could rebound,” Mr. Gayle said.
“There are early signs that it’s happening,” he added, referring to Monday’s action. Shares of small companies rallied more than their large-cap peers, driving the Russell 2000 up 2.1%.
The Stoxx Europe 600 rose 0.3%, rebounding from early losses after eurozone manufacturing data for September was revised higher, suggesting the region remains resilient to spillover from China’s slowdown.
Asian stocks fell after two reports showed a continued contraction in China’s manufacturing activity. The Shanghai Composite Index lost 1.7% and Japan’s Nikkei Stock Average declined 2.1%
Meanwhile, the Turkish lira surged more than 3% against the dollar as investors welcomed the surprise victory of President Recep Tayyip Erdogan’s political party in a vote that should end months of political uncertainty.
In commodity markets, U.S. oil prices lost 1% to $46.14 a barrel. Gold fell 0.5% to $1,135.80 a troy ounce.
The yield on the 10-year Treasury note rose to 2.185%, from 2.151% on Friday. Yields rise as prices fall.