Daily Market Color October 31, 2018Stocks Finish October on a High Note Close the Books on a Wild October US stocks managed to string together two positive trading sessions to finish the month as the tech-heavy Nasdaq surged 2.01%, the S&P 500 rose 1.09% and the DJIA increased 0.97% on the day. However, observing October in its entirety, the picture wasn’t nearly as rosy for risk assets: Nasdaq: declined 9.2% – worst month since 2008 S&P 500: lost nearly 7% – worst month since 2011 DJIA: down 5.1% – worst month since January 2016 Crude oil prices also experienced a forgettable October, as today’s 1.3% slide pushed WTI futures to a monthly loss of 10.8% – the steepest monthly decline since July 2016. Global supply concerns continue to hamper energy markets despite the sanctions on Iran set to begin on November 4th. Increased production has been observed in Russia, Saudi Arabia, and the United States, with Russian output touching its highest since 1991 at 11.41 million barrels per day. US Treasurys experienced a volatile month, with the yield on the 10-year note fluctuating within a 20bp range, touching as high as 3.25% before coming down to its current reading of 3.145%. The 2s10s spread has improved slightly off its recession-alarming levels of this summer (<20bps) and currently resides near 27bps. Despite the recent selloff in equities and ongoing trade concerns, the Fed remains intent on maintaining its pace of gradual rate hikes and has continued to reinforce the message throughout the month. Fed fund futures have reflected as such and are currently assigned a 73% probability of a rate hike at the December FOMC meeting. Pacing key economic data releases today, the ADP national employment report displayed 227,000 new hires by private employers in the US during October – its largest monthly add since February. The pace surged past expectations of 187,000, comprised largely of payroll additions in the service sector which totaled 189,000. Often a leading indicator for the Labor Department’s more comprehensive employment report due out Friday, today’s ADP figure foreshadows steady gains in the nonfarm payroll data, where median forecasts point to a 200,000 payroll addition (134k in prior month) and a 3.7% unemployment rate (which would match an 49-year low).
