MarketView for November 5

Summary

The Dow Jones Industrial Average and the S&P 500 indexes both ended the day on Tuesday in negative territory following two consecutive days of gains as Wall Street tried to take into account the implications of strong economic data as it affects monetary policy over the next several months.

After the closing bell, Tesla Motors reported stronger-than-expected third-quarter earnings, but offered a fourth-quarter outlook that fell short of Street expectations. The company's shares fell about 11 percent.

The Institute for Supply Management said its services index rose a point to 55.4 in October despite a partial government shutdown during the first half of the month. The reading came in higher than September's 54.4, handily beating expectations for a slight deceleration.

Investors are scrambling to measure the impact of strong data on the Federal Reserve's decision to keep pumping $85 billion monthly into the economy through bond purchases. This stimulus has been instrumental in spurring a rally that has set the S&P 500 on course toward its best year in a decade.

Yet, over and over again the Fed has stressed its decision to change the level of stimulus is and will continue to be data-dependent. Once the economy is strong enough, it has said it may begin to withdraw its massive bond purchases.

According to Thomson Reuters data, of 404 companies in the S&P 500 that have reported results through Tuesday morning, 69.6 percent have topped Wall Street's expectations, above the long-term average of 63 percent. However, just 53.3 percent beat revenue forecasts, below the 61 percent average since 2002.

Michael Kors ended the day up 5.8 percent to close at $79.13 after the retailer reported a better-than-expected 40 percent increase in quarterly revenues.

GT Advanced Technologies rose more than 20 percent to $10.10 after it said Apple will open a manufacturing facility in Arizona in partnership with the mineral crystal specialist to make sapphire materials for Apple's electronic devices.

CVS Caremark advanced 2 percent to $63.22 after the drugstore operator and pharmacy benefits manager posted a higher-than-expected profit and raised its forecast.

Tenet Healthcare was the worst performer on the S&P 500, down 8.8 percent to $44 after its third-quarter net income slid from a year earlier.

Service Sector of Economy Grows

The service-sector of the economy grew in size during the month of October as corporations increased hiring despite a partial government shutdown. At the same time,  the increase in new orders slowed for a second straight month, an industry report on Tuesday showed.

According to a report by the Institute for Supply Management (ISM), its services index rose a point to 55.4 last month. Economists had expected it to slip to 54.0. A reading above 50 indicates expansion

While last month's reading was below the near eight-year high of 58.6 reached in August, it did increase despite the government shutdown. The employment index rose to 56.2, bringing it closer to the six-month peak hit in August. It slipped to 52.7 in September.

But the forward-looking new orders component fell for a second month running, checking in at 56.8 in October from 59.6 the prior month. The data comes days after the ISM's national factory index showed U.S. manufacturing grew at its fastest pace last month in 2-1/2 years.

Overall, however, recent economic data has been mixed, and growth is expected to have slowed to a 1.9 percent rate in the third quarter from 2.5 percent between April and June.