The U.S. equity markets gained ground amid some upbeat economic reports, but the advances were tempered as investors await tomorrow’s monetary policy decision.
Earnings again dominated the equity front with mixed results. Treasury yields were mixed and little changed, while crude oil prices were higher, gold was lower and the U.S. dollar was flat.
The Dow Jones Industrial Average (DJIA) rose 29 points (0.1%) to 23,377
The S&P 500 Index ticked 2 points (0.1%) higher to 2,575
The Nasdaq Composite increased 29 points (0.4%) to 6,728
In moderate volume, 871 million shares were traded on the NYSE and 2.0 billion shares changed hands on the Nasdaq
WTI crude oil rose $0.23 to $54.38 per barrel and wholesale gasoline gained $0.02 to $1.73 per gallon
The Bloomberg gold spot price fell $5.33 to $1,270.96 per ounce
The Dollar Index—a comparison of the U.S. dollar to six major world currencies—was nearly unchanged at 94.52
Home prices rise, Consumer Confidence Soars
The 20-city composite S&P CoreLogic Case-Shiller Home Price Index showed a 5.9% y/y gain in home prices in August, matching expectations. Month-over-month (m/m), home prices were up 0.5% on a seasonally adjusted basis for August, above forecasts calling for a 0.4% rise.
The Consumer Confidence Index increased to a level of 125.9 in October from the upwardly revised 120.6 in September, and compared to the Bloomberg estimate of a 121.5 reading. Both the Present Situation Index and the Expectations Index of business conditions for the next six months improved. On employment, the labor differential—consumers’ appraisal of jobs being “plentiful” minus being “hard to get”—increased to18.8 from the 14.7 level posted in September.
Treasuries were mixed, but little changed, as the yields on the 2-year and 10-year notes increased 2 basis points (bp) to 1.60% and 2.38%, respectively, while the 30-year bond rate dipped 1 bp to 2.87%.
Tomorrow’s economic calendar will be a heavy one, beginning with the ADP Employment Change Report, forecasted to show that 196,000 private sector jobs were added during October after increasing 135,000 in the month prior, followed by reads on manufacturing activity in the form of the ISM Manufacturing Index and Markit’s final Manufacturing PMI Index, with the former expected to tick lower to 59.4 and the latter to remain at the preliminary level of 54.5, with both indexes denoting expansion with a reading above 50. Construction spending and MBA Mortgage Applications are also slated for release.
However, the highlight of the day is liable to be the Federal Open Market Committee’s (FOMC) monetary policy decision in afternoon action. No change to the target for its fed funds rate is expected, but the accompanying statement will likely garner heightened scrutiny as the Committee has indicated in past meetings that it expects one more rate hike before year-end. No economic projections or press conference by Chairwoman Janet Yellen will follow the decision. The meeting comes amid the backdrop of global economic optimism, Fed leadership speculation, subdued inflation, and optimism regarding U.S. tax reform.
Europe ticks higher, Asia mixed on data and monetary policy focus
European equity markets traded mostly higher, though volume was lighter than usual with German markets closed for a holiday. Earnings and economic data were in focus, with some heavyweights posting mixed results, and as Eurozone Q3 GDP growth of 2.5% y/y bested expectations of a 2.4% rate of expansion and Q2′s 2.3% rise.
The Eurozone consumer price inflation estimate came in cooler than expected for October, and the markets likely traded with some caution ahead of this week’s Bank of England (BoE) monetary policy decision, which is expected to deliver its first rate hike in over a decade. The BoE’s decision will follow tomorrow’s announcement from the Fed with uncertainty regarding who President Trump will pick to be the Chairman of the Central Bank festering.
The euro dipped and the British pound ticked higher versus the U.S. dollar, while bond yields in the region were mixed.
The U.K. FTSE 100 Index and Germany’s DAX Index gained 0.1%, France’s CAC-40 Index and Italy’s FTSE MIB Index advanced 0.2%, Spain’s IBEX 35 Index jumped 0.8% and Switzerland’s Swiss Market Index rallied 0.7%.
Stocks in Asia finished mixed following the declines in the U.S. yesterday, with the markets awaiting monetary policy decisions out of the U.S. and U.K. later this week, as well as lingering uncertainty regarding who will be the next Fed Chief. The monetary policy decisions were preceded by the Bank of Japan’s announcement today that it will leave its policy stance unchanged.
Economic data was in focus, with Japan reporting an unexpected decline in household spending and a smaller-than-expected drop in industrial production for September, while China said growth in manufacturing and services output slowed this month, with the latter decelerating more than expected.
Stocks in Japan finished flat as the yen gained some ground, while markets in Australia and India both declined.
Chinese equities ticked higher, but those traded in Hong Kong declined modestly and South Korean listings gained solid ground amid some upbeat earnings reports.