Today’s U.S. economic data gave buyers and sellers something to work with. Manufacturing continues to expand, but a sharp decline in construction spending and stubborn inflation pressures cloud the broader outlook. The data lean mildly bullish for manufacturing activity, but offer a less convincing signal for stocks.
The stronger bullish influence is coming from the Middle East, where renewed hopes for U.S.–Iran diplomacy and sharply lower oil prices are helping buyers regain some control after a difficult October.
ISM manufacturing strengthens, but price pressures remain elevated
The ISM manufacturing report provided the strongest growth signal. The headline index rose to 55.5 from 54.5, beating expectations near 54.6–54.7. Production increased to 59.0 from 56.7, while new orders edged higher to 55.5 from 55.3. Employment slipped to 52.4 from 52.7 but remained above the 50 expansion barometer. Manufacturing continues to grow, although hiring lost a little momentum.
On inflation, ISM prices paid fell to 75.2 from 77.9. That is encouraging at the margin, but the level still points to widespread input-price increases. Supplier deliveries also slowed further. The report gives the growth bulls support, but offers the Fed little reason to declare victory on inflation.
S&P Global PMI signals slower growth and pressure on margins
The S&P Global report tempered some of that optimism. Its final October manufacturing PMI fell to 54.9 from September’s 55.9, below expectations for 56.0. That still represents solid expansion, but at a slower pace.
Employment growth was the strongest since April 2021, while input-cost inflation accelerated and delivery times lengthened. For companies, stronger activity is welcome. Higher costs and supply delays create a tougher backdrop for profit margins.
Construction spending falls sharply as residential activity weakens
Construction spending was the clear weak spot. September spending fell 1.9% on the month and 2.7% from a year earlier. Private construction declined 2.4%, led by a sharp 5.5% drop in residential spending.
Those figures highlight weakness in housing and leave the growth picture uneven. Manufacturing is expanding, but construction is moving in the opposite direction.
Iran diplomacy hopes and falling oil give stock buyers support
Hopes for progress toward a diplomatic agreement between the U.S. and Iran are giving stock buyers a more supportive backdrop. Mediated talks have kept open the possibility of reopening the Strait of Hormuz and easing energy-supply disruptions. Oil fell sharply as traders reduced some of the geopolitical risk premium, although no agreement has been confirmed.
For stocks, the potential benefits extend beyond cheaper gasoline. Sustained declines in oil would lower transportation and production costs, ease pressure on household budgets and help corporate margins. Less energy-driven inflation could also give the Fed more breathing room.
Airlines, transportation companies and consumer businesses could benefit, while lower bond yields—if they follow—would provide additional support for technology valuations.
Nasdaq leads the rebound as November trading begins
Buyers are taking back some control to start the new week and month. At the latest snapshot, the S&P 500 is up 73.99 points, or 0.98%, at 7,654.06. The Nasdaq Composite has gained 332.28 points, or 1.31%, to 25,769.28, while the Nasdaq 100 is higher by 320.85 points, or 1.13%, at 28,705.70.
The Russell 2000’s 1.16% advance points to participation beyond the largest technology names.
The rebound is encouraging, but Friday’s selling left technical damage to repair. Buyers have the early momentum. Holding today’s gains into the close—and clearing the next resistance levels—would give that recovery more credibility.
S&P 500: Buyers reclaim the 100-day moving average
For the S&P 500, the move back above the 100-day moving average at 7,618.85 is a positive first step. That level now becomes a key barometer for buyers and sellers.
Staying above it keeps buyers in play, with the 100-hour moving average near 7,701 and the 200-hour moving average at 7,720.68 as the next upside targets.
A move back below 7,618.85 would weaken the recovery and put sellers back in a stronger position.
Nasdaq Composite: September’s swing low is the next hurdle
The Nasdaq Composite stopped short of its 200-day moving average during Friday’s tumble. Today’s rebound has reached 25,799.46, leaving the index just below September’s swing low at 25,831.74.
Getting above that level—and staying above it—would give buyers more confidence that the recovery can extend. There would still be work to do, however, with the 100-day moving average near 26,258 the next important upside hurdle.
Until those levels are reclaimed, the rebound remains a recovery within a more vulnerable technical backdrop.
Nasdaq 100: Key swing area stands between buyers and further gains
The Nasdaq 100 also stopped short of its rising 200-day moving average, currently near 26,942, during Friday’s decline. Instead, buyers found support near the 38.2% retracement of the advance from the late-March low at 28,108.
Today’s gap higher has brought the index closer to a key swing area between 28,822 and 28,953, although the session high near 28,753 remains below that resistance.
Buyers need to get above that area and hold it to strengthen the bullish bias. Beyond it, the 100-day moving average near 29,554 becomes the next major upside target.
Intel remains under pressure after Friday’s sharp fall. Apple reports after the close and is settling between the 100/200 hour MAs
Despite the gains in the broader indices, Intel shares remain under pressure after the earnings disappointed after the close on Thursday. Shares of Intel fell over 25% on Friday and are currently trading down near 3% today at $63.76. That is a lowest level since mid April.
Apple shares are also lower with the price testing its 200 hour moving average at $340.25. The 100 hour moving averages at $344.64. Apple will report their earnings after the close today expectations of $1.99 EPS (versus $1.85 last year), and revenues of $113.4 billion (versus $102.47 billion last year)
Buyers have an opening. Can they build on it?
In the video above, I break down those technical barometers for the S&P, the NASDAQ composite, and the NASDAQ 100. I also take a look at shares of Intel and Apple from a technical perspective. The fundamental story said one thing, but the price action and the technical tools applied to the price action gives traders the complete picture.
This article was written by Greg Michalowski at investinglive.com.