After yesterday’s rally, U.S. equities finished mixed, as lackluster reports from Dow members DowDuPont and Microsoft were a drag on the blue chip index.
Treasury yields were lower and the U.S. dollar was modestly higher amid mixed reports on the economic front. Crude oil prices and gold were higher.
The Dow Jones Industrial Average lost 15 points (0.1%) to 25,000
The S&P 500 Index gained 23 points (0.9%) to 2,704
The Nasdaq Composite advanced 99 points (1.4%) to 7,282
In heavy volume, 1.4 billion shares were traded on the NYSE and 2.9 billion shares changed hands on the Nasdaq
WTI crude oil declined $0.44 to $53.79 per barrel and wholesale gasoline was down $0.02 at $1.38 per gallon
The Bloomberg gold spot price ticked $0.17 higher to $1,320.08 per ounce
The Dollar Index—a comparison of the U.S. dollar to six major world currencies—gained 0.3% to 95.59
Manufacturing data declines, new home sales pop
The Q4 Employment Cost Index rose by 0.7% quarter-over-quarter, below forecasts and last quarter’s gain of 0.8%.
New home sales rose 16.9% month-over-month in November to an annual rate of 657,000 units, versus the Bloomberg forecast calling for 570,000 units and the upwardly revised 562,000 unit pace in October. The median home price was down 11.9% y/y to $302,400. New home inventory fell to 6.0 months of supply at the current sales pace from 7.0 months in October. Sales rose in the Northeast, Midwest, and the South but fell in the West. New home sales are based on contract signings instead of closings.
The Chicago Purchasing Managers Index decreased to 56.7 in January, from 63.8 in December, and well below expectations of 61.5, with a reading above 50 denoting expansion. Notable drags in the headline index were a two-year low in the New Orders component, and a 10-month low in the Production component.
Treasuries were higher, as the yields on the 2-year and the 10-year notes declined 5 basis points to 2.46% and 2.63%, respectively, while the 30-year bond rate was down 3 bps to 3.00%.
Tomorrow’s economic calendar will be highlighted by the January labor report, with non-farm payrolls expected to have increased by 165,000 following last month’s surprising 312,000 jump, while private sector payrolls are estimated to rise by 175,000. The unemployment rate is projected to remain at December’s 3.9% level and average hourly earnings are anticipated to rise 0.3% m/m. The ISM Manufacturing Index is also slated for release, with economists looking for a decline to 53.6 for January from the 54.1 posted in December, while the final University of Michigan Consumer Sentiment Index and November’s delayed construction spending and wholesale inventories reports will also be released.
Europe mostly lower, Asia mixed on data and Fed decision optimism
European equities finished mostly lower, as the markets digested some mixed global earnings results and comments from the Fed yesterday, while also keeping an eye on U.S./China trade discussions that remain underway. Yesterday’s U.S. monetary policy decision kept rate hike expectations in check, with Fed Chairman Jerome Powell noting that a “wait-and-see policy is warranted,” as “the case for raising rates has weakened.”
In economic news, Q4 Eurozone GDP expanded at a 1.2% y/y pace, in line with expectations, but below the 1.6% posted a year ago, while German December retail sales dropped 4.3%, the fastest pace in 11 years. Brexit also remained a focal point for investors, as EU officials informed the U.K. government that it will not renegotiate the current divorce agreement, despite demands from the U.K. Parliament. The euro was flat and the British pound rose versus the U.S. dollar, while bond yields in the region were lower.
Stocks in Asia finished mixed following the rally in the U.S. yesterday and after comments from Fed Chairman Jerome Powell’s press conference were closely scrutinized. Traders exuded some caution after China’s manufacturing PMI for January ticked higher to 49.5 from December’s 49.4, and above forecasts calling for a decline to 49.3, but it was the second-consecutive month in contraction territory for the measure, as the demarcation point between expansion and contraction is 50. The report may have reignited fears of inadequate stimulus measures from Chinese officials as the economy slows.
Stocks in mainland China and those traded in Hong Kong were able to post gains, as the Asian nation’s non-manufacturing PMI index was well above estimates at 54.7, whereas economists were looking for the level to remain at December’s 53.8. High level negotiations between the U.S. and China were also of note, as a comprehensive trade deal to end the tariff standoff remains elusive.
Japanese equities moved nicely higher, despite an advance in the yen versus the U.S. dollar and as December factory output remained in contraction territory.