Market Insights 1/2/2019

U.S. stocks nudged higher to begin 2019, showing some resiliency in the face of another dose of disappointing manufacturing data out of China and the Eurozone, which appeared to preserve global growth concerns.

The U.S. dollar rallied and Treasury yields were mixed, while gold was little changed.

The Markets…

The Dow Jones Industrial Average ticked 19 points higher (0.1%) to 23,346

The S&P 500 Index increased 3 points (0.1%) to 2,510

The Nasdaq Composite gained 31 points (0.5%) to 6,666

In moderately heavy volume, 961 million shares were traded on the NYSE and 2.2 billion shares changed hands on the Nasdaq

WTI crude oil traded $1.13 higher to $46.54 per barrel and wholesale gasoline was up $0.03 at $1.33 per gallon

The Bloomberg gold spot price dipped $0.04 at $1,282.57 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—advanced 0.7% to 96.80

Manufacturing data ticks lower

The final December Markit U.S. Manufacturing PMI Index was revised to 53.8 from the preliminary reading of 53.9, where the Bloomberg forecast called for it to remain. The index was below the 55.3 level posted in November, but a reading above 50 indicates growth in output. The release is independent and differs from Institute for Supply Management’s (ISM) manufacturing report, as it has less historic value and Markit weights its index components differently.

Tomorrow, the December manufacturing picture will further develop, courtesy of the release of the ISM Manufacturing Index, predicted to decline to 57.5 from 59.3 in November, with a reading above 50 denoting expansion. December regional manufacturing reports leading up to tomorrow’s release have mostly disappointed, notably with Dallas and Richmond signaling contraction for the first time since 2016.

Other reports on tomorrow’s economic docket include: the ADP employment change, weekly initial jobless claims, MBA mortgage applications, construction spending and monthly auto sales.

Treasuries finished mixed, with the yield on the 2-year note ticking 1 basis point higher to 2.49%, while the yield on the 10-year note decreased 4 bps to 2.65% and the 30-year bond rate declined 5 bps to 2.97%.

Global markets slide on another sign of contraction in the Chinese manufacturing sector

European and Asian equities finished mostly lower in the wake of another dose of disappointing Chinese manufacturing data that appeared to keep global growth slowdown concerns intact. Caixin’s China PMI Manufacturing Index showed a larger-than-expected slowdown for December and that the sector contracted for the first time since May 2017. The report followed China’s official manufacturing PMI release earlier this week that also showed the first contraction in output since 2016.

Markit’s final December Eurozone Manufacturing PMI Index confirmed the slowest pace of expansion since February 2016, with contraction in Italy remaining and being joined by France, while growth in Germany and Spain was modest. However, Markit showed growth in UK manufacturing activity unexpectedly accelerated in December as orders jumped, likely partially due to Brexit stockpiling as businesses continue to fret over the potential divorce agreement.

The euro and British pound moved lower versus the U.S. dollar, while markets in Japan remained closed.