LIVE MARKETS-U.S. business activity expands at fastest pace in 20 months - Markit

* S&P edges up, Dow near flat, Nasdaq down in early trade
* Financials, materials lead major S&P sector gainers; tech, cons disc red
* Euro STOXX 600 index up around 0.6%
* Dollar flat; crude, gold dip; U.S. 10-Yr T-Nt yield ~0.85%

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U.S. BUSINESS ACTIVITY EXPANDS AT FASTEST PACE IN 20 MONTHS - MARKIT (1040 EDT/1540 GMT)
The U.S. manufacturing and services sectors have continued to expand this month as the
economy slouches through its recovery from the pandemic recession.
According to global financial information firm IHS Markit's "flash" purchasing managers'
indexes (PMI), which provide a preview of business activity this month, manufacturing
activity picked up nominally, rising one-tenth of a point to a reading of 53.3.
In the services sector, however, which suffered a significant blow from
mandated shutdowns and social distancing protocols, activity rebounded at a faster pace, hitting
a level of 56, beating the consensus.
Taken together, the composite of the two marks the fastest expansion of business activity in
20 months.
A PMI number above 50 indicates growth.
"The US economy looks to have started the fourth quarter on a strong footing, with business
activity growing at a rate not seen since early 2019," writes Chris Williamson, chief business
economist at IHS Markit. "The service sector led the expansion as increasing numbers of
companies adapted to life with COVID19, while manufacturing continued to report solid growth
amid rising demand from households and businesses."
"A slowdown in hiring and weaker new order inflows were in part attributable to hesitancy in
decision making ahead of the presidential election," Williamson added.

The Institute for Supply Management (ISM), whose manufacturing and services PMI reports for
October are due the first week of November, has also shown an expansion...
ISM and Markit PMI indexes differ in the weight they give to various subcomponents, such as
new orders and employment. The chart below shows how wide these differences can be.

The stock market is mixed headed into the weekend, with healthcare boosting the S&P
into the green, the Dow languishing near zero and tech firms pulling the Nasdaq
into negative territory.
All three indexes are on course for losses on the week.

(Stephen Culp)
*****

MORE BULLS THAN BEARS FOR FIRST TIME SINCE FEBRUARY (1005 EDT/1505 GMT)
Optimism over the short-term direction of the U.S. stock market has hit a near 7-month high
in the latest American Association of Individual Investors (AAII) Sentiment Survey. With this,
pessimism dipped, while neutral sentiment rose.
AAII reported that bullish sentiment, or expectations that stock prices will rise over the
next six months, gained 1.0 percentage point to 35.7%. Optimism was last higher on April 8, 2020
(36.6%). Nevertheless, bullish sentiment remains below its historical average of 38.0% for the
33rd consecutive week and the 38th week this year.
Bearish sentiment fell by 2.7 percentage points to 33.0%. Pessimism was last lower on
February 19, 2020 (28.7%). Bearish sentiment remains above its historical average of 30.5% for
the 35th consecutive week and the 37th time this year.
Neutral sentiment increased 1.8 percentage points to 31.2%, to a 12-week high. Even with the
increase, neutral sentiment is below its historical average of 31.5% for the 39th time out of
the past 41 weeks.
With these changes, the bull-bear spread improved to +2.72 from minus 0.97 last week. This
is the spread's first positive reading since February 20, or one day after what proved to be a
significant top in the S&P 500:



In this week’s special question, AAII asked its members how the recent increase in
coronavirus cases is impacting their outlook for stocks.
About 28% of respondents said that the recent increase is causing them to be more cautious
and is negatively affecting their outlook for stocks. This compares to 27% of respondents who
said that it's having little to no impact on their outlook for stocks.

(Terence Gabriel)
*****


S&P 500: A COMING SLOG? (0910 EDT/1310 GMT)
Coming into yesterday, the S&P 500 had fallen 5 of 7 days. That said, after an early
Thursday dip to 3,415 found support near the 50-day (10-week) moving average, at about 3,405,
the benchmark index reversed, and closed higher.
E-Mini futures are suggesting modest upside follow-through on Friday.
Nevertheless, of concern, although still positive, a weekly momentum measure is threatening
to roll over. Indeed, the MACD, appears at risk of breaking below its signal line, which would
be a bearish signal.
Still, if the SPX can overwhelm its most recent intraday reaction high at 3,515.76,
potential will increase for new highs above 3,588.11.
However, even in that event, much additional upside could prove to be a struggle. Of note,
since late 2018, the average foray into record-high territory has only been 4.6% above the prior
peak, with the median push only 2.5% above the prior high. Those levels are at 3,678 and 3,755.
But complicating the issue is the log-scale resistance line from late 2018, which
essentially capped strength in early September. This line, on a weekly basis, is now at about
3,630, or only a little more than 1% above the prior high. The line is ascending about 5-10
points per week, so over the next month or so, it will be a stiff hurdle in the 3,635/3,665
area, or only about 1%-2% above the prior high, and about 5%-6% above current levels.
Conversely, breaking down below the 3,405 area, can see pressure intensify. The rising
20-week moving average (WMA), which supported the market in late-September, now comes in at
about 3,297.
The September 24 low is at 3,209.45, and the 40-WMA (200-DMA) is now at around 3,120. These
levels are about 7%-10% below Thursday's close.
Thus, based on what may be significant levels, action over the coming weeks, may be quite
choppy, and especially volatile.



(Terence Gabriel)
*****


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(Terence Gabriel is a Reuters market analyst. The views expressed are his own)