Traders will look for more signs Tuesday that the year-end rally still has more legs to run.
“We’re entering the best part of the year,” said Paul Nolte, portfolio manager at Kingsview Asset Management. “From a seasonal perspective investors are excited.”
Stocks kicked off the first trading day of November with solid gains that took major averages to key levels.
The S&P 500 gained about 1.2 percent to close at 2,104.05, above 2,100 for the first time since Aug. 17. The Dow Jones industrial average added 165 points to end at 17,828.76, positive for the year so far. The Nasdaq composite outperformed to close at 5,127, while the Nasdaq 100 hit highs last seen during the dotcom bubble of March 2000.
Lance Roberts, head of Streettalklive.com, said Monday’s trade was “first day of the month repositioning.”
“We could be down a little tomorrow because we had a good day today, but we’re right in the middle of resistance, which is becoming support,” he said, noting stocks could have a good finish to the year, after a slight pullback around Thanksgiving or early December.
While the major averages posted their best month in four years in October, the gains do not necessarily preclude further upside into the end of the year, if history is any guide.
Since 1980, the S&P 500 has tended to close the fourth quarter higher after gains of more than 8 percent in October, according to Kensho. On the four occasions (excluding 2015) when the S&P posted returns of 8 percent or more in October, the index rallied in November and December three of those times, with a median return of 2.76 percent.
Tuesday is a relatively quiet day for economic reports and Fed speakers. The bulk of central bank-speak is expected Wednesday with Fed Chair Janet Yellen on Capitol Hill and New York Fed President William Dudley holding a news briefing on looking beyond the macro economy.
Auto sales and factory orders are the only major items on Tuesday’s economic calendar, in addition to more earnings reports.
“I think for once the market’s got enough momentum. Probably the Fed speakers aren’t going to spook the market,” said Marc Chaikin, CEO of Chaikin Analytics.
“I think corporate earnings are driving the market right now. It’s an interesting time. Good corporate beats, economic data just soft enough (to keep the Fed away). It can sustain the rally and perhaps break us through 2,130,” he said, noting the index could go up another 5 to 8 percent.
October auto sales are scheduled for release throughout the day Tuesday, and are expected to show continued strength.
“Auto sales should be really strong,” said Jack Ablin, chief investment officer at BMO Private Bank. We’re “on pace to sell more than 17 million autos this year.”
U.S. auto sales have rarely seen such strong sales.
“That’s another thing the market can key in tomorrow to keep the rally going,” Chaikin said.
September factory orders are due at 10 a.m. ET.
“We expect a significant drop in factory orders based on the poor report on durable goods,” said Ben Garber, economist at Moody’s Analytics Capital Markets.