Morning Minutes 10/31/2018

Positive ADP Payrolls Keep the Market Rebound Rolling

October 31, 2018
9:00 am EDT

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Market Commentary By:
Colin Cieszynski, CFA, CMT
Chief Market Strategist
ccieszynski@siawm.com
+1 (647) 282-4428

Yesterday’s rally in US stocks that saw the Dow gain 431 points or 1.75% has continued through world trading overnight and into this morning. The Nikkei soared 2.1%, while the Hang Seng, Shanghai and the FTSE have all gained 1.4%-1.6%, plus the Dax is up 1.2%.

US indices appear to be heading for another positive start with Dow futures up about 175 points or another 0.7% after picking up a tailwind from good economic news. ADP payrolls of 227K came in well above the 189K street estimate, providing a bullish signal about the US job market heading into Friday’s nonfarm payrolls report.

Earnings reports may spark significant action in some stocks today as well. Facebook, was up and down in aftermarket trading yesterday after the social media giant reported EPS of $1.76 above the $1.46 street estimate. Monthly users increased by 10% to 2.27B and revenue per user jumped to $27.11 rom $21.20 a year ago suggesting the company may be starting to move past the scandals and lowered growth expectations that crushed its stock in recent months.

General Motors shares have reportedly jumped 10% in premarket trading after the automaker posted a positive earnings report. EPS of $1.87 came in way above the $1.25 street estimate while sales of $35.79B beat the street by nearly $1B. The impact of higher costs due to tariffs dragged on North American auto sales, but apparently trucks did well, and overall higher selling prices offset soft volumes.

Canadian GDP increased by 0.1% in August over July, slightly better than the flat result the street was expecting. Canadian producer prices were mixed with raw material prices falling 0.9% but industrial product prices rising 0.1%. In the US, the Employment Cost Index rose 0.8%, slightly more than the 0.7% street estimate. Strong growth and increasing wage inflation keep the pressure on the Fed to keep raising rates and treasury yields have been creeping upward this morning.

There is a lot more news on the way this week including Chicago PMI and energy inventories later this morning. Tomorrow brings manufacturing PMI reports and Apple earnings, followed by employment and trade numbers for the US and Canada on Friday.

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