Markets Remain Determined to Grind Higher
U.S. equities continued their advance despite a jump in gasoline prices amid the impact of Hurricane Harvey, as well as a mixed bag of economic news and continued anxiety surrounding political and global monetary policy uncertainty.
Treasury yields were little changed and the U.S. dollar was modestly lower, while crude oil prices and gold were solidly higher.
The Dow Jones Industrial Average (DJIA) advanced 60 points (0.3%) to 21,952,
The S&P 500 Index gained 14 points (0.6%) to 2,472. The S&P 500 ended August higher by .09% despite suffering 1.54 and 1.45% decline on August 17th and August 10th respectively. In August the S&P 500 had 9 trading days lower and 14 higher in the 23 trading that constituted the month.
The Nasdaq Composite rallied 60 points (1.0%) to 6,429. Ever the resilient index the NASDAQ added 1.27% on to its total despite a 2.13% decline on August 10th and a 1.93% decline on August 17th. Of the 23 trading days in August, 12 were lower and 11 ended higher.
In moderately heavy volume, 905 million shares were traded on the NYSE and 1.9 billion shares changed hands on the Nasdaq
WTI crude oil rose $1.27 to $47.23 per barrel and wholesale gasoline jumped $0.14 to $1.78 per gallon
The Bloomberg gold spot price was $14.36 higher at $1,322.96 per ounce
The Dollar Index—a comparison of the U.S. dollar to six major world currencies—declined 0.2% to 92.69
Personal income and spending data mixed
Personal income was 0.4% higher month-over-month in July, above the Bloomberg forecast of a 0.3% gain, and compared to June’s unrevised flat reading. Personal spending rose 0.3% last month, below expectations of a 0.4% gain, and versus June’s upwardly revised 0.2% gain. The July savings rate as a percentage of disposable income was 3.5%.
Weekly initial jobless claims rose by 1,000 to 236,000 last week, below forecasts of 238,000, with the prior week’s figure revised higher by 1,000 to 235,000. The four-week moving average declined by 1,250 to 236,750, while continuing claims fell 12,000 to 1,942,000, south of estimates of 1,951,000.
Pending home sales declined 0.8% m/m in July, versus projections of a 0.3% increase, and following June’s downwardly revised 1.3% gain. Compared to last year, sales were 0.5% lower. Pending home sales are used as a gauge of the pipeline of existing home sales, which unexpectedly fell in July.
Treasuries were little changed, as the yields on the 2-year and 10-year notes, along with the 30-year bond, were flat at 1.33%, 2.13% and 2.73%, respectively. Bond yields have been quiet though the U.S. Dollar Index has rebounded from recent pressure on eased concerns toward flared-up tensions toward North Korea, lingering global monetary policy and U.S. political uncertainties, and the impact of Hurricane Harvey.
Tomorrow, the domestic economic calendar will end the week with a bang, courtesy of a variety of August reports, such as the ISM Manufacturing Index, Markit’s Manufacturing PMI Index, the final University of Michigan Consumer Sentiment Index, and auto sales. Manufacturing activity is expected to continue to depict growth and consumer sentiment is projected to remain near January’s thirteen-year high.
However, the headlining report will likely be the release of the August non-farm payroll report, projected to show jobs grew by 180,000 after July’s 209,000 gain, and employment in the private sector is expected to increase by 170,000 jobs after the prior month’s 205,000 advance. The unemployment rate is expected to remain at 4.3%, while average hourly earnings are estimated to rise 0.2% m/m after growing 0.3% in July. Compared to the last year, earnings are predicted to be up 2.6%, after July’s 2.5% gain. Construction spending for July is also on tap for tomorrow.
Yesterday’s stronger-than-expected Q2 GDP report caused Fed rate hike probability for December to tick higher but remain below 50%, per Bloomberg, and another dose of strong economic data could move the needle a bit further. Employment has been solid but inflation—the other side of the Central Bank’s dual mandate—has been stubbornly low, setting the stage for the wage component of the labor report to continue to garner the most scrutiny.
Europe and Asia higher following positive day in U.S.
European equities gained ground, with the euro continuing to give back a recent rally following reports that showed European Central Bank members were getting concerned with the currency’s recent surge, and despite a hotter-than-expected read on eurozone inflation for August. In other economic news, the eurozone unemployment rate remained at 9.1% for July and German retail sales fell more than forecasted for last month. The British pound lost ground on the U.S. dollar and bond yields in the region dipped. The latest round of U.K. Brexit negotiations are wrapping up, while geopolitical, monetary policy and U.S. political uncertainties continue to fester.
The U.K. FTSE 100 Index was up 0.9%, Germany’s DAX Index gained 0.4%, France’s CAC-40 Index rose 0.6%, and Spain’s IBEX 35 Index increased 0.5%, while Italy’s FTSE MIB Index and Switzerland’s Swiss Market Index traded 0.8% to the upside.
Stocks in Asia finished mostly higher after another positive session in the U.S., aided by a stronger-than-expected read on Q2 GDP growth for the world’s largest economy, which helped overshadow lingering global monetary policy and U.S. political uncertainties, and lingering geopolitical concerns. Japanese equities advanced, with the yen extending a pullback from a recent jump and despite a larger-than-expected decline in the nation’s industrial production for July.
Mainland Chinese stocks and those traded in Hong Kong declined, with a stronger-than-expected Manufacturing PMI Index being met with the non-Manufacturing PMI Index that showed growth slowed for August. Australian securities rose, while listings in South Korea declined. Meanwhile, markets in India advanced ahead of the nation’s report on Q2 GDP growth after the closing bell, which showed expansion decelerated to a 5.7% y/y pace, versus forecasts of a 6.5% gain and compared to the 6.1% increase posted in Q1.