* Major averages regroup, push back toward day's highs
* Most major S&P 500 sectors rally; tech out front, defensives sag
* U.S. 10-Year Treasury yield hits 5-day high
Oct 31 (Reuters) - Welcome to the home for real-time coverage of U.S. equity markets brought to you by Reuters stocks reporters and anchored today by Terence Gabriel. Reach him on Messenger to share your thoughts on market moves: terence.gabriel.thomsonreuters.com@reuters.net
WILL GRASS GROW POST-ELECTION? MIDTERM CANNABIS OUTLOOK (1310 EDT/1710 GMT)
With all eyes on the outcome of the upcoming midterm elections, six initiatives regarding medical and recreational use of marijuana (and related issues) will be decided at state ballot boxes.
In a research note laying out potential election outcomes and the subsequent likelihood of marijuana bills passing at the federal level, Cowen cites a Gallup poll showing 66 percent of Americans now favor legalization, with the most historically skeptical demographic groups (Republicans and ages 55+) now leaning that direction.
The broker outlines five general categories into which dozens of pending bills in Washington fall, including medical protection, the SAFE act for bankers, veteran's assistance, deference to state law and tax legislation. Of these, Cowen believes all but the last two can advance under a divided congress, the result it believes to be most likely.
While cannabis-focused ETFs have struggled through much of the year, they have rallied since their mid-August troughs. Horizons Marijuana Life Sciences Index ETF HMMJ.TO and ETFMG Alternative Harvest ETF MJ.P have advanced ~30 percent and ~22 percent, respectively, since August 14 (albeit significantly off their highs).
(Stephen Culp)
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TRYING TO HOLD ON (1216 EDT/1616 GMT)
In the wake of opening upside gaps and early thrusts higher, the major averages have been seeing gains fade. said, the Nasdaq Composite .IXIC is still holding to a gain of about 1.8 percent. It was up more than 2.7 percent earlier.
Most major S&P 500 .SPX sectors are higher on the day with tech .SPLRCT out front. Defensives/bond proxies are down on the day.
That said, six of eleven sectors have weakened over the past several hours with communication services .SPLRCD and consumer discretionary .SPLRCD giving back the most on a percentage basis. This while the defensive groups come off their lows.
(Terence Gabriel)
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RISKS RIGHT AROUND THE CORNER (1125 EDT/1525 GMT)
Stifel is out with a research note highlighting November and midterm market risks.
Stifel's head of institutional equity strategy Barry Bannister notes that Wall Street may fear that Democrats will unwind tax cuts if they gain the House, as Stifel expects. Indeed, with monetary policy support fading, any loss of fiscal support may weigh on sentiment.
Additionally, Stifel expects November to be the month of mounting pressure on China trade and Iran. Thus, there is the potential for more tariffs, as well as oil price volatility, all affecting stocks.
Moving forward, however, they expect President Trump to push a "Highway Bill." Combined with oil support and in anticipation of a China deal that would be especially good for energy, agriculture and manufacturers. Thus, they see potential for machinery stocks such as Caterpillar (NYSE:CAT) CAT.N and Deere DE.N to get a normal seasonal boost in late 2018/early 2019.
Here are Stifel charts showing that Gallup presidential approval has a strong track record and points to Republican loss of House control:
(Terence Gabriel)
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RECOVERY BUILDS (1025 EDT/1425 GMT)
The recovery off Monday's low continues to gain steam with the major averages all tacking on more than 1 percent in early trade. Nasdaq .IXIC is especially buoyant, rising more than 2.5 percent. major S&P 500 .SPX sectors are higher with tech .SPLRCT , communication services .SPLRCL and consumer discretionary out front.
Defensive/bond-proxies are souring as "risk-on" resurfaces. A U.S. 10-Year Treasury yield US10YT=RR on the rise can't be helping either.
Meanwhile, as the rally builds, growth is attempting to reassert itself vs. value. Gabriel)
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DOW JONES INDUSTRIAL AVERAGE: COUNTERATTACK (0904 EDT/1304 GMT)
With CBT E-Mini Dow Jones Futures 1YMcv1 suggesting the Dow Jones Industrial Average .DJI is poised to thrust more than 200 points higher at the open, the blue-chip average is set to regain more lost ground.
Indeed, the DJI had tumbled as much a 10.5 percent over 18 trading days from its October 3 peak into Monday's low.
That said, the daily RSI has been forming higher lows over the past several weeks. This momentum convergence suggests the DJI was ripe for a reversal. (Click on chart below)
However, given that the Dow's decline appears to have an impulsive 5-wave structure (Elliott Wave basis), it suggests that the prevailing trend has flipped from up to down.
Therefore, with this wave appearing complete at Monday's 24,122.33 low, the onus is on the bulls to prove strength is not just a retracement rally prior to the resumption of a developing bear trend.
Forging above the 200-day moving average (25,136.81 Tuesday close) and the 38.2 percent Fibonacci retracement of the October slide, can extend. The next level is at the 50 percent retracement (25,537.02).
The area defined by the October 16 high (25,817.68) and the 61.8 percent retracement (25,870.91) should be especially difficult to retake, if strength is just a counter-bounce.
Of note, after an initial 5-wave decline into the February trough, the DJI did retrace 75 percent of its slide before falling to a new low.
(Terence Gabriel)
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BACK-TO-BACK? (0833 EDT/1233 GMT)
With a global recovery underway, U.S. Futures are building on Tuesday's gains. This as the market attempts to rise for a second straight day. it's now been 28 straight trading days since the S&P 500 .SPX last recorded back-to-back gains. That matches a 28-day dry spell on this basis in November/December 2015.
Meanwhile, European indices are rallying, while both China and Japan closed higher.
ADP (NASDAQ:ADP) private payrolls came in at 227k vs. a 189k estimate. The U.S. 10-Year Treasury yield US10YT=RR is up to a 5-day high, pressing above 3.15 percent.
Here is your premarket snapshot:
(Terence Gabriel)
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https://tmsnrt.rs/2ONjnie premarket10312018
https://tmsnrt.rs/2OWFMtg DJI10312018B
https://tmsnrt.rs/2OZCUff earlytrade10312018
https://tmsnrt.rs/2P20vvJ midday10312018
https://tmsnrt.rs/2OYkb3L Stifel10312018d
https://tmsnrt.rs/2OZWEPT Cowen cannibis poll Image
https://tmsnrt.rs/2P2gSIH YTD Marijuana ETF performance Image
https://tmsnrt.rs/2OYXFI2
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