Stocks Rally to Begin 'Pivotal' Week for Rates Outlook

November extends October's stellar run in the beginning of what will be a crucial week for Federal Reserve watchers.
By Keris Alison Lahiff ,

November extended October's stellar run in the beginning of what will be a crucial week for Federal Reserve watchers. 

The S&P 500 gained 1.2%, the Dow Jones Industrial Average was up 1%, and the Nasdaq rose 1.5%. The day's gains add to a surge of more than 8% over the past month. 

"This week could prove fairly pivotal in shaping the market's Fed view," wrote RBS Securities analysts in a note.

At the top of the list is the release of the October jobs report on Friday. Nonfarm payrolls are expected to have added more than 200,000 jobs after two straight months of disappointing results. The unemployment rate will likely have slipped to 5% from 5.1%. 

"Since the Fed's decision hinges largely on the data, the October employment report will play a key role in shaping near-term market expectations for a hike ahead of year-end," RBS analysts added. "We expect the October employment report to look solid in nearly all respects."

Fedspeak from the top brass throughout the week will be scrutinized for insight into whether the central bank is comfortable hiking rates as soon as December. Fed Chair Janet Yellen will give a speech to Capitol Hill on regulatory issues on Wednesday, while a number of Fed officials including Vice Chair Stanley Fischer and New York Fed President William Dudley will speak at a conference in New York on Thursday.

The Fed opted to keep interest rates at crises levels during its October meeting. At the same time, the U.S. central bank expressed optimism that the recently slowdown in the economy was temporary and that fundamentals remain strong. 

It was a mixed bag of data on Monday. On the one hand, manufacturing growth in the U.S. remained sluggish in October, hovering at its lowest level since May 2013. Meanwhile, U.S. construction spending rose to its highest level in seven-and-a-half years in September, driven by an increase in residential building. 

Health care stocks led markets higher after Shire (SHPG) - Get Report agreed to acquire Dyax (DYAX)  for a healthy premium. The Health Care SPDR ETF (XLV) - Get Report added more than 2%. 

Earnings were a scattered bunch, too. Visa (V) - Get Report dropped after announcing a deal to acquire Visa Europe and posting earnings that missed fourth-quarter estimates. Meanwhile, Estee Lauder (EL) - Get Report climbed after reporting strong quarterly sales across its category and geographic portfolio, while Clorox (CLX) - Get Report sales rose 6% over the quarter after stripping out the effects of a stronger dollar. 

Hewlett-Packard officially became two companies on the New York Stock Exchange after a long process of separation. Hewlett Packard Enterprise "HPE," led by Meg Whitman, contains the data storage and servers business, while HP Inc. (HPQ) - Get Report consists of its PC and printers units. Investors bet on the PC business, pushing the newly-separated HP Inc. 13% higher, while HPE slid more than 1%.

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