U.S. stocks opened the fourth quarter Monday on a higher note, boosted by Canada joining Mexico and the United States in a trade agreement. The S&P 500 closed the session +0.4%, down from its +0.8% intraday high. The Dow finished strong, up 0.7%, but the Nasdaq Composite lost steam as the day wore on, closing 0.1% lower. The small-cap Russell 2000 also closed lower, tumbling 1.4%.
On Sunday night, Canada agreed to allow greater dairy market access to the U.S., while also capping its automobile exports to the States. The deal, also known as the United States-Mexico-Canada Agreement (USMCA) replaces the 24-year-old NAFTA deal between the countries. However, Congress still has to approve the deal, which likely won't be easy, with Washington Post reporter Robert Costa tweeting that "Administration officials anticipate a fierce political battle to win congressional approval."
As for the S&P sector standings, it was energy that enjoyed the highest gains, finishing higher by 1.5%. The oil-sensitive sector climbed to a two-month high, as WTI crude oil (+3.2%) reached $75/bbl for the first time since November 2014 and Brent oil (+2.9%) sported high gains, closing at $85.11/bbl.
Meanwhile, the real estate (-0.9%), utilities (-0.3%), consumer discretionary (-0.2%), and communication services (-0.1%) sectors weighed on the broader market. Facebook (FB 162.44, -2.02, -1.2%) weighed down the communications sector, as it continued to stumble after its 2.6% fall Friday when it announced it discovered a "very serious" security breach.
In other corporate news, General Electric (GE 12.09, +0.80) opened 15.1% higher before trimming its gains to 7.1% after the company suddenly announced it was replacing CEO John Flannery with former Danaher CEO Larry Culp. Mr. Flannery held the position for just over a year, in which he was unable to wake the company from its deep slumber and stated expectations to miss 2018 earnings.
Separately, Tesla (TSLA 310.70, +45.93) rebounded 17.4% after CEO Elon Musk agreed to settle charges with the SEC, in which Mr. Musk and Tesla are to pay $20 million each, and Mr. Musk will step down as chairman for three years. This concludes the saga that ensued after Mr. Musk tweeted last month that he had the funds to take the company private.
In politics, Director of the National Economic Council Larry Kudlow stated that a U.S.-China deal was not imminent, as President Trump is not satisfied with the progress of trade talks.
Reviewing Monday's economic data, which included the ISM Manufacturing Index for September and the Construction Spending report for August:
- The ISM Manufacturing Index for September declined to 59.8 (Briefing.com consensus 60.4) from 61.3 in August. The dividing line between expansion and contraction is 50.0; and September marked the 24th consecutive month of expansion.
- The key takeaway from the report is that even with the September pullback, the Index remains near multi-year highs with continued growth in most sub-indices.
- Total construction spending increased 0.1% in August (Briefing.com consensus 0.4%) following a downwardly revised 0.2% increase (from 0.1%) in July.
- The key takeaway from the report is that public construction spending has continued driving the overall growth rate while private construction spending growth has moderated.
Looking ahead, there will be no economic data on Tuesday, but investors will receive September auto and truck sales throughout the day.
- Nasdaq Composite +16.4% YTD
- Russell 2000 +9.0% YTD
- S&P 500 +9.4% YTD
- Dow Jones Industrial Average +7.8% YTD