U.S. equities melted higher on Monday to push large-cap stocks back into positive territory for the year for the first time since July. The Nasdaq 100 hit 15-year highs. The catalyst? A weak manufacturing activity report that once again raised hopes of a delay to the Federal Reserve’s rate hike liftoff timing.
Investors are also looking ahead to a busy week, including the end of the bulk of the third-quarter earnings reporting season, a number of Fed speakers on Wednesday and the all-important October jobs report on Friday.
In the end, the Dow Jones Industrial Average gained 0.9%, the S&P 500 shot up 1.2%,the Nasdaq Composite added 1.5% and the Russell 2000 finished the day 2.1% higher. Further, treasury bonds were weaker, the dollar was little changed and both gold and crude oil moved lower.
Despite the drop in oil, energy stocks led the way with a 2.4% gain. Healthcare was also frisky, rising 2% thanks to a 3.9% rise in the iShares Biotech ETF (NASDAQ:IBB), which was recommended to Edge subscribers in late October as the fund breaks up and out of the downtrend started back in July. Defensive areas like telecom, consumer staples and utilities lagged.
The headlines were filled with mergers and acquisitions news, including a deal by Visa Inc. (NYSE:V) to buy Visa Europe for more than $18 billion. But a majority were focused in healthcare, with talks between Pfizer Inc. (NYSE:PFE) and Allergan (AGN) continuing, while Shire PLC (ADR) (NASDAQ:SHPG) bought Dyax Corp. (NASDAQ:DYAX) for $37.30 a share in cash vs. a $27.53 close on Friday in a deal valued at around $5.6 billion.
The two successor companies to Hewlett-Packard began trading today, pushing HP Inc. (NYSE:HPQ) up nearly 13%. HPQ will focus on personal computer and printers. Hewlett-Packard Enterprise (NYSE:HPE), focused on commercial systems and services, dropped 1.6%.
On the downside, Chipotle Mexican Grill, Inc. (NYSE:CMG) was hit with a 2.5% loss as the company closed 43 restaurants in the Seattle and Portland areas after an E. coli outbreak. Shares of CMG traded down to early July levels, off nearly 18% from their early October highs.
On the economic front, the ISM Manufacturing Activity Index came in below expectations (but still in expansionary territory), falling to 50.1 vs. the 50.3 expected. The employment subindex contracted outright. This is the weakest result since May 2013.
Globally, manufacturing activity reports out of China and Europe were both tepid as well, with China’s measure logging its third consecutive month in contractionary territory.
For now, soft economic data is resulting in a momentum driven market meltup — albeit one featuring relatively narrow breadth with Big Tech and biotech leading the way — that’s likely to continue through the end of the year.
A classic Santa rally. Edge Pro subscribers are ready, enjoying a 70%+ gain in their November $115 Apple Inc. (NASDAQ:AAPL) calls.
Anthony Mirhaydari is founder of the Edge and Edge Pro investment advisory newsletters. A two-week and four-week free trial offer has been extended to InvestorPlace readers.
