Category Archives: Daily Insights

Market Insights 2/14/2019

U.S. equities bounced off their lows to finish mixed amid the largest drop in retail sales in nine years.

Treasury yields were lower following the disappointing retail sales report, as well as a rise in jobless claims, while the U.S. dollar turned lower to end the day with a modest loss.

Crude oil prices reversed to the upside to finish higher and gold also gained ground.

The Markets…

The Dow Jones Industrial Average declined 104 points (0.4%) to 25,439

The S&P 500 Index lost 7 points (0.3%) to 2,746

The Nasdaq Composite added 7 points (0.1%) to 7,427

In heavy volume, 949 million shares were traded on the NYSE and 2.1 billion shares changed hands on the Nasdaq

WTI crude oil advanced $0.51 to $54.41 per barrel and wholesale gasoline was up $0.04 to $1.51 per gallon

The Bloomberg gold spot price increased $5.99 to $1,312.26 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—fell 0.1% at 97.01

Retail sales surprisingly drop by most in nine years

Advance retail sales for December—this report was postponed due to the government shutdown—fell 1.2% month-over-month, versus the Bloomberg forecast of a 0.1% gain, and November’s figure was revised lower to a 0.1% increase. Last month’s sales ex-autos were down 1.8% m/m, compared to expectations to match November’s revised flat reading. Sales ex-autos and gas decreased 1.4%, compared to estimates of a 0.4% gain, and November’s figure was unrevised at a 0.5% rise. The control group, a figure used to calculate GDP, dropped 1.7%, versus projections of a 0.4% gain, and compared to November’s upwardly-revised 1.0% increase.

This was the biggest drop in nine years as all but two of the thirteen categories fell, led by sales at gasoline stations, and sporting goods, hobby, musical instrument, & book stores. Non-store retailers—which include online sales—posted a 3.9% drop, though sales of autos and at building materials & garden equipment stores were the only groups to post an increase.

The report seemed to cause recession concerns to flare-up, but the data is a bit stale after being delayed by four weeks. Some concerns about data reliability are also emerging given the notable divergence from recent reports that showed the labor market remains solid and wage growth is accelerating, while figures released during the holiday shopping season suggested consumer spending was healthy

The Producer Price Index (PPI) showed prices at the wholesale level in January dipped 0.1% m/m, compared to forecasts of a 0.1% gain, and following December’s upwardly-revised 0.1% decline. The core rate, which excludes food and energy, was up 0.3% m/m, versus expectations of a 0.2% gain, and after December’s upwardly-adjusted flat reading. Y/Y, the headline rate was 2.0% higher.

Treasuries were higher, as the yield on the 2-year note fell 3 basis points (bps) to 2.50%, the yield on the 10-year note shed 4 bps to 2.66%, and the 30-year bond rate declined 2 bps to 3.01%. The markets grappled with the confusing retail sales report and paying attention to high-level trade talks between the U.S. and China, with reports suggesting progress and the possibility the March 1 deadline could be extended, while Congress is set to vote on a tentative deal to avert another government shutdown and focus will then likely turn to whether President Donald Trump will sign the deal.

More data to help complete the inflation picture will come tomorrow in the form of the Import Price Index, anticipated to show prices were flat m/m during January following the 1.0% m/m decline in December, while manufacturing data will also come into focus, courtesy of the Federal Reserve’s industrial production and capacity utilization report, projected to indicate production was up 0.1% m/m for January and utilization nudged higher to 78.8%, and the Empire Manufacturing Index, with economists expecting a level of 7.6, with a reading above zero indicating expansion in activity.

Europe mostly lower following U.S. data, Asia mixed

European equities gave up early gains and finished mostly lower on the heels of the lackluster economic data in the U.S., but optimism surrounding high-level trade talks between the U.S. and China, as well as mostly positive earnings reports within the region, kept the losses in check.

In economic news, Eurozone Q4 GDP growth came in at a 1.2% y/y pace, matching estimates, even as Germany’s economic output remained subdued. The euro was higher versus the U.S. dollar, while the British pound saw some pressure, as lawmakers continued to debate a Brexit deal. Bond yields in the region were mostly lower.

Stocks in Asia finished mixed with the markets paying close attention to high-level trade talks between the U.S. and China, while digesting some mixed economic data in the region. China’s trade data for January came in well above expectations, while there was some focus on the impact of the timing of the Lunar New Year, though Japan reported that its Q4 GDP returned an expansion of 1.4% on a quarter-over-quarter annualized basis, matching estimates and rebounding from Q3′s 2.6% contraction.

Mainland Chinese equities and those traded in Hong Kong declined, while stocks in Japan finished flat, with the yen holding onto a recent decrease.

Random Thoughts

The S&P 500 was up in January and is currently setting the pace for a positive performance this month. However, the S&P 500’s average return in February has been the second lowest since WWII, typically delivering a decline, while rising in price only 52% of the time. (September is the worst, not only averaging a deeper decline, but also falling more frequently than it rose.)

Yet should the S&P 500 end up notching a gain this month, it would trigger an encouraging signal for the entire year. There have been 28 calendar years since 1945 in which the S&P 500 rose in price in both January and February, with 2017 being the most recent.

In 100% of these observations, the S&P 500 was up for the full year and recorded an average total return of nearly 24%. What’s more, the S&P 500 was higher in the remaining 10 months of the year 93% of the time, returning an average 13.5%.

Market Insights 2/13/2019

U.S. stocks added to yesterday’s solid rally, with lingering trade optimism helping lift the global markets, while a cooler-than-expected read on inflation seemed to keep Fed concerns in check.

the U.S. dollar resumed a recent run, and Europe delivered another dose of disappointing economic data.

Crude oil prices rose and treasury yields nudged higher and gold declined.

The Markets…

The Dow Jones Industrial Average rose 118 points (0.5%) to 25,543

The S&P 500 Index gained 8 points (0.3%) to 2,753

The Nasdaq Composite added 6 points (0.1%) to 7,420

In moderate volume, 820 million shares were traded on the NYSE and 2.1 billion shares changed hands on the Nasdaq

WTI crude oil advanced $0.80 to $53.90 per barrel and wholesale gasoline was up $0.04 to $1.47 per gallon

The Bloomberg gold spot price decreased $4.98 to $1,305.81 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—rose 0.5% at 97.16

Consumer price inflation below forecasts

The Consumer Price Index (CPI) was unchanged month-over-month in January, below the Bloomberg estimate of a 0.1% rise, and matching December’s upwardly-revised figure. The core rate, which strips out food and energy, was 0.2% higher m/m, matching expectations and December’s unrevised gain. Y/Y, prices were 1.6% higher for the headline rate, north of forecasts of a 1.5% rise and south of December’s unrevised 1.9% increase. The core rate was up 2.2% y/y, versus projections of a 2.1% gain and in line with December’s unadjusted increase.

The MBA Mortgage Application Index fell 3.7% last week, following the prior week’s 2.5% decline. The decrease came as a 0.1% dip in the Refinance Index added to a 6.1% decline for the Purchase Index. The average 30-year mortgage rate fell 4 basis points to 4.65%.

Treasuries dipped despite the inflation data, with the yield on the 2-year note rising 3 bps to 2.53% and the yield on the 10-year note ticking 1 bp higher to 2.70%, while the 30-year bond rate was little changed at 3.03%.

Bond yields were higher and the U.S. dollar extended a recent run. The House of Representatives could vote on a spending deal to avert a second partial government shutdown as early as tonight, reports suggest. Congressional negotiators reached a tentative deal on Monday to avoid another shutdown, although mixed signals are being sent as to what level of support it will receive from U.S. lawmakers and dent Trump.

However, the headline report on tomorrow’s docket will likely be the December retail sales release, which had been postponed due the government shutdown. Sales are expected to be 0.1% higher m/m, after November’s 0.2% rise, while excluding autos, sales are expected to be flat, following the prior month’s 0.2% increase. Stripping out autos and gas, sales are forecasted to be up 0.4%, after November’s 0.5% increase, and the control group—a figure used to help calculate GDP—is expected to advance 0.4%, adding to November’s 0.9% rise.

Weekly initial jobless claims will also be released on Thursday, expected to decline by 9,000 to 225,000, as well as business inventories, estimated to rise 0.2% in November after October’s 0.6% increase.

Europe mostly rises as trade optimism lingers, overshadowing another dose of disappointing data

European equities finished mostly higher, with optimism regarding a potential U.S.-China trade deal lingering and supporting the technology and materials sectors as U.S. President Donald Trump indicated yesterday that he would be tempted to push back a March trade deadline if the world’s two largest economies were close to a “real deal.”

U.K. inflation fell to a two-year low in January, rising at an annual rate of 1.8% versus a 2.1% increase at the end of last year and estimates of a 1.9% gain. Eurozone industrial production fell more than expected in January, sliding for a second-straight month. The euro and British pound were lower versus the U.S. dollar.

Stocks in Asia finished mostly higher, fostered in part by the uptick in U.S.-China trade-deal optimism, which appeared to help yesterday’s rally in the U.S. equity markets and extended rebound in Europe. However, caution may have set in ahead of today’s U.S. inflation data and tomorrow’s Q4 GDP report out of Japan that is expected to show economic grow returned to expansion after Q3′s contraction.

Chinese markets gained, along with South Korean equities, as U.S. Trade Representative Robert Lighthizer will continue trade talks Thursday in Beijing, with the main sticking points seeming to be enforcement mechanisms on areas such as forced technology transfer and intellectual property protection.

Japanese equities jumped during the final hour of trading, as the yen accelerated a drop, extending yesterday’s post-holiday gains.

Market Insights 2/12/2019

U.S. stocks followed yesterday’s mixed action with a rally, amid a tentative deal to avert another government shutdown and comments from President Donald Trump that suggested the March 1 U.S.-China trade deadline could slide if a “real deal” looks to be nearing as talks resume this week.

Treasury yields bucked a recent downturn and crude oil prices rose on reports of potentially more supply cuts from Saudi Arabia. Gold nudged higher.

The Markets…

The Dow Jones Industrial Average rose 373 points (1.5%) to 25,426

The S&P 500 Index gained 35 points (1.3%) to 2,745

The Nasdaq Composite added 107 points (1.5%) to 7,415

In moderate volume, 873 million shares were traded on the NYSE and 2.1 billion shares changed hands on the Nasdaq

WTI crude oil advanced $0.69 to $53.10 per barrel and wholesale gasoline was up $0.01 to $1.43 per gallon

The Bloomberg gold spot price increased $2.84 to $1,310.97 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—fell 0.3% at 96.69

Small business optimism deteriorates more than expected

The National Federation of Independent Business (NFIB) Small Business Optimism Index for January fell to 101.2—the lowest since November 2016—from December’s unrevised 104.4 level, versus the Bloomberg expectation of a slight fall to 103.0. Business owners continued hiring, but expressed rising concerns about future economic growth.

The Labor Department’s Job Openings and Labor Turnover Survey (JOLTS), a measure of unmet demand for labor, rose to 7.34 million jobs available to be filled in December from November’s upwardly-adjusted 7.17 million, and was above the forecasted 6.85 million. The hiring and the separation rates were unchanged at November’s levels of 3.9% and 3.7%, respectively.

Treasuries finished lower, with the yield on the 2-year note ticking 1 basis point higher to 2.50%, while the yields on the 10-year note and the 30-year bond advanced 2 bps to 2.68% and 3.01%, respectively. Bond yields moved higher in the wake of a recent slump and the U.S. dollar gave back some of a resurgence as of late.

The markets awaited tomorrow’s first dose (of three) of January inflation data from the economic calendar, courtesy of the Consumer Price Index (CPI). Headline CPI is expected to tick 0.1% higher month-over-month after dipping 0.1% in December, while core CPI—excluding food and energy—is projected to match the prior month’s 0.2% gain.

Global markets rise amid U.S. political and trade optimism

European equities were higher, following yesterday’s broad-based rebound from losses last week and ahead of some key inflation data in the U.S. over the next few days.

Markets looked to U.K. Prime Minister Theresa May’s update in Parliament on Brexit developments, saying that she needed more time to complete the process with the European Union but that lawmakers can vote on an agreement by February 27. This follows last week’s warning by the Bank of England that the “fog of Brexit” is creating tensions and uncertainty to push down confidence.

Stocks in Asia finished mostly higher in the wake of yesterday’s mixed results in the U.S. and as officials from Washington and Beijing are set to continue trade discussions, while some support also came from the reports that a second U.S. government shutdown may be averted. Japanese stocks surged in a return to action following a holiday and as the yen extended yesterday’s losses versus the U.S. dollar. Chinese markets nudged higher as investors pondered the scenario of a U.S./China trade deal prior to higher-level negotiations between the two nations on Thursday.

Market Insights 2/11/2019

U.S. equities finished the trading session mixed.

Persistent worries over trade took center stage in the midst of the start of another round of U.S./China trade talks that will be followed by higher-level negotiations later in the week.

Adding to the nervousness, negotiations to avoid another partial government shutdown have reportedly stalled, while some lower-level earnings results came in mixed.

Treasury yields were higher with a dormant economic calendar unable to provide any sway, and the U.S. dollar rose, while gold and crude oil prices were lower.

The Markets….

The Dow Jones Industrial Average fell 53 points (0.2%) to 25,053

The S&P 500 Index gained 2 points (0.1%) to 2,710

The Nasdaq Composite added 10 points (0.1%) to 7,308

In moderate volume, 813 million shares were traded on the NYSE and 1.8 billion shares changed hands on the Nasdaq

WTI crude oil lost $0.31 to $52.41 per barrel and wholesale gasoline shed $0.03 to $1.42 per gallon

The Bloomberg gold spot price decreased $8.03 to $1,308.58 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—was up 0.4% at 97.06

Treasuries lower ahead of heavy economic docket this week

Treasuries were lower with the economic calendar void of any reports today, as the yields on the 2-year and 10-year notes, as well as the 30-year bond, were all up 2 basis points at 2.49%, 2.66% and 3.00%, respectively.

Although earnings season continues to roll on, this week’s robust economic calendar is poised to garner some heightened attention and begin to heat up tomorrow with the releases of the National Federation of Independent Business (NFIB) Small Business Optimism Index, anticipated to move lower to a level of 103.0 for January from December’s 104.4, as well as the Job Openings and Labor Turnover Survey (JOLTS), a measure of unmet demand for labor, with economists predicting that 6.85 million jobs were available to be filled in December, slightly lower than the 6.89 million posted in November.

January reads on inflation are also slated for release later in the week in the form of the Consumer Price Index (CPI), the Producer Price Index (PPI) and the Import Price Index. Consumer health will also be on display, with the releases of December retail sales and the preliminary February University of Michigan Consumer Sentiment Index. Finally, manufacturing activity will also come into focus, courtesy of regional manufacturing and industrial production reports.

Europe rebounds following mixed week, Asia mixed

European equities finished higher, as all the major sectors helped the Stoxx Europe 600 Index recover from a downturn last week. Markets appeared to focus on global trade progress, with a U.S. delegation scheduled to travel to China for a fresh round of negotiations this week. Discussions last week concluded without a deal, while President Donald Trump confirmed on Thursday that he will not meet with Chinese leader Xi Jinping before the current temporary trade agreement expires in March.

Stock markets in Asia were mixed following last week’s strong finish in the U.S. markets, which were aided by gains in the technology sector, but conviction remained skittish amid the search for developments on the U.S./China trade front as a truce deadline lingers. Investors seemed to search for signs of an extension of the deadline or for olive branches from either of the world’s largest economies.

President Trump stated on Thursday that he will not meet with Chinese President Xi Jinping before new tariffs are slated to take effect at the beginning of March, while also concluding that a meeting between the two leaders is a prerequisite for any trade deal. Stocks in mainland China jumped, and those traded in Hong Kong increased nicely, after returning to action following an extended Lunar New Year holiday break.

Random Thoughts – Midcaps

Through 12/31/18, the S&P MidCap 400 Index posted a 20-year compound annual growth rate (dividends included) of 9.7% versus 5.8% for the S&P 500.

During that time, this U.S. mid-cap equity index outpaced its large-cap brethren nearly two out of every three years. Yet mid-cap stocks have fallen out of favor in the recent past, as the MC 400 beat the 500 in only one of the last five years.

Contrarian investors might now be wondering if the possibility of “reversion to the mean” awaits them in 2019.

We think it does, based on the improvement in relative price performance, EPS growth expectations and relative multiple.

Market Insights 2/8/2019

U.S. equities bounced off their lows of the day to finish mixed, with gains in the technology sector powering the Nasdaq and S&P 500 Index back into positive territory.

Treasury yields were lower amid an empty economic calendar and the U.S. dollar was slightly higher, while gold and crude oil prices finished to the upside.

The Markets…

The Dow Jones Industrial Average fell 63 points (0.3%) to 25,106

The S&P 500 Index gained 2 points (0.1%) to 2,708

The Nasdaq Composite added 10 points (0.1%) to 7,298

In moderate volume, 832 million shares were traded on the NYSE and 2.0 billion shares changed hands on the Nasdaq

WTI crude oil inched $0.08 higher to $52.72 per barrel and wholesale gasoline rose $0.02 to $1.45 per gallon

The Bloomberg gold spot price increased $4.39 to $1,317.84 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—was up 0.1% at 96.63

Markets were higher for the week, as the DJIA increased 0.2%, the S&P 500 Index gained 0.1%, and the Nasdaq Composite advanced 0.5%

Treasuries higher as economic calendar empty

Treasuries were higher amid a dormant economic calendar, as the yield on the 2-year note ticked 1 basis point (bp) lower to 2.47%, the yield on the 10-year note lost 3 bps to 2.63%, and the 30-year bond rate fell 2 bps to 2.97%.

The U.S. stock markets pulled back somewhat over the past couple of sessions, with volatility remaining low amid the backdrop of depressed inflation and as global central banks look to be becoming more dovish and slowing down on the path to normalization. Further, global economic growth continues to show signs of weakness and earnings season has been mixed as Congress has yet to pass another short-term spending bill to prevent a second government shutdown this year.

Europe lower as regional growth concerns persist, Asia lower

European equities finished lower, with global volatility festering amid signs of weaker regional growth, after the European Central Bank noted yesterday that incoming data has continued to be weaker than expected. This comes as European Central Bank board member Benoit Coeure stated in a Barron’s interview that there is insufficient economic data to conclude that the continent is facing a lasting and serious slowdown. Trade concerns continued to linger as markets appear to be discounting the chance that President Donald Trump and Chinese President Xi Jinping will meet again before a trade tariff deadline in March.

The euro and the British pound were lower versus the U.S. dollar, while bond yields in the region were mostly to the downside.

Stocks in Asia were lower, adding to a weekly drop in most markets on the heels of a sharp fall in the U.S. yesterday, with global market jitters continuing to climb and volatility persisting, as crude oil prices moved lower. U.S./China trade negotiations took center stage after comments from National Economic Council Director Larry Kudlow commented that a “sizable distance” remains between the two countries’ positions.

The yen gained ground to pressure markets in Japan, and following a report that showed the nation’s December account balance posted a surplus of 452.8 billion yen, shy of expectations. Stocks in Hong Kong saw modest declines, returning to action after an extended holiday break, while shares in South Korea and India also decreased. Mainland Chinese markets remained closed for the Lunar New Year.

Stocks add to weekly gains

While lower toward the latter part of the week, courtesy of increased trade jitters and global growth worries, the U.S. markets were able to post another week of gains. Trade worries flared up to end the week after National Economic Council Director Larry Kudlow commented that there was a “sizable distance” between the negotiations between the world’s two largest economies, while optimism that President Trump and Chinese leader Xi Jinping would meet ahead of March’s trade truce deadline seemed to decline.

The economic calendar was light, though the ISM non-Manufacturing Index decreased more than expected, with concerns over the partial government closing being mentioned. Weekly initial jobless claims showed a decline, although the government shutdown likely affected the data, while earnings season made a turn to the second half, with revenue and earnings beat rates near 60% and 70%, respectively, per data compiled by Bloomberg.

The markets had to contend with more signs that global monetary policies may be retreating from the normalization path. The Bank of England cut its economic outlook, warning that the “fog of Brexit” led it to leave its monetary policy unchanged, and the Reserve Bank of India cut rates while abandoning its hawkish tone. The U.S. dollar rebounded after finishing lower last week, while Treasury yields continued to slide. Crude oil prices fell, and gold was lower after reaching 2019 highs last week.

Although earnings season will continue to roll on, next week’s robust economic calendar is poised to garner some heightened attention, headlined by January reads on inflation in the form of the Consumer Price Index (CPI), the Producer Price Index (PPI) and the Import Price Index. Toward the beginning of the week, a Fed Chair speech could garner the market’s attention. Consumer health will also be on display, with the releases of December retail sales and the preliminary February University of Michigan Consumer Sentiment Index. Finally, manufacturing activity will also come into focus, courtesy of regional manufacturing and industrial production reports.

Market Insights 2/7/2019

U.S. equities finished solidly lower, as investor uneasiness surrounding global growth concerns on the heels of another dose of disappointing German data and tempered economic forecasts in Europe were exacerbated by increased trade anxiety following comments from National Economic Council Director Larry Kudlow that a “sizable distance” remains between U.S./China trade negotiations.

In economic news, jobless claims pulled back from last week’s jump and consumer credit was mostly in line with expectations.

Treasury yields were lower, as were crude oil prices, while gold and the U.S. dollar were higher.

The Markets…

The Dow Jones Industrial Average fell 221 points (0.9%) to 25,170

The S&P 500 Index declined 26 points (0.9%) to 2,706

The Nasdaq Composite tumbled 87 points (1.2%) to 7,288

In heavy volume, 946 million shares were traded on the NYSE and 2.2 billion shares changed hands on the Nasdaq

WTI crude oil lost $1.37 to $52.64 per barrel and wholesale gasoline shed $0.03 to $1.43 per gallon

The Bloomberg gold spot price increased $3.43 to $1,310.03 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.1% higher at 96.50

Jobless claims decline following last week’s jump

Weekly initial jobless claims fell by 19,000 to 234,000, versus the Bloomberg expectation calling for a drop to 221,000, with the prior week’s figure being unrevised at 253,000. The data recently likely has been impacted by the government shutdown and the four-week moving average rose by 4,500 to 224,750, while continuing claims dropped 42,000 to 1,736,000, north of estimates of 1,733,000.

Treasuries were higher, as the yields on the 2-year and 10-year notes, as well as the 30-year bond declined 4 bps to 2.49%, 2.65% and 3.00%, respectively.

After reaching lows in December, stocks have rebounded sharply, with strong breadth, as some of the worst fears appear to have subsided. But there are still uncertainties that are likely to cap near-term gains and/or lead to elevated volatility. Earnings season has been mixed, with the main message appearing to be slowing growth but no near-term recession. The Fed has turned more dovish and is likely on hold for a while, depending of course on incoming data. China’s economic slowdown is also causing concern, and the different way they are attacking the problem has generated more questions than answers.

There are no reports slated for release on tomorrow’s economic calendar.

Europe lower as economic concerns continue, Asia mixed

European equities were broadly lower, as economic concerns festered following disappointing earnings reports in the region, while a surprising decline in German industrial production followed a similar read on the nation’s factory orders yesterday.

The European Central Bank released its economic bulletin overview for February, noting that incoming data has continued to be weaker than expected, while the European Commission solidly downgraded its economic forecast for the Eurozone. Brexit uncertainty continued, with European and U.K. negotiators agreeing to have further talks as a March deadline looms, while the Bank of England (BoE) cut its economic outlook by the most since the 2016 referendum, per Bloomberg. The lowered outlook came as the BoE as expected kept its monetary policy on hold, with Governor Carney noting that the “fog of Brexit” is creating tensions and uncertainty to push down confidence. The British pound overcame early losses and was higher versus the U.S. dollar, after the BoE’s Carney suggested the prospect of further interest-rate increases remains on the table. 0% fall.

Stocks in Asia finished mixed as the U.S. markets snapped a recent string of gains, though volume remained lighter than usual with Chinese markets continuing to be closed for the Lunar New Year. Japanese equities declined, with the yen gaining some ground and earnings tilting to the disappointing side.

Market Insights 2/5/2019

U.S. stocks extended 2019 gains with another mixed dose of earnings results continuing to foster relatively positive sentiment as the season rolls on.

Treasury yields and crude oil prices were lower, while the U.S. dollar and gold gained ground.

The Markets..

The Dow Jones Industrial Average rose 172 points (0.7%) to 25,412

The S&P 500 Index gained 13 points (0.5%) to 2,738

The Nasdaq Composite increased 55 points (0.7%) to 7,402

In moderate volume, 842 million shares were traded on the NYSE and 2.2 billion shares changed hands on the Nasdaq

WTI crude oil declined $0.90 to $53.66 per barrel and wholesale gasoline was little changed at $1.43 per gallon

The Bloomberg gold spot price advanced $2.93 to $1,315.19 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.2% higher at 96.05

Services sector report dips below forecasts

The January Institute for Supply Management (ISM) non-Manufacturing Index decreased to 56.7 from December’s upwardly-revised 58.0 level, and versus the Bloomberg forecast of a drop to 57.1. A reading above 50 denotes expansion. New orders and business activity expansion moved south of 60, and employment growth ticked higher to 57.8. Prices rose to 59.4.

Treasuries were higher, with the yield on the 2-year note dipping 2 basis points to 2.52%, while the yields on the 10-year note and 30-year bond declined 3 bps to 2.70% and 3.03%, respectively.

Tomorrow, the economic calendar will bring the release of MBA mortgage applications, along with the trade balance, which is projected to show the deficit shrank to $54.0 billion in November from $55.5 billion in October. The trade report has been delayed by the government shutdown.

Tomorrow, the preliminary Q4 non-farm productivity and unit labor costs report is slated to be released but the Bureau of Labor Statistics noted that if GDP data from the Bureau of Economic Analysis are not available, the release will only have a limited set of data for the report.

Europe sees gains as earnings buoy markets, Asian stocks mixed in light volume

European equities finished broadly higher, following U.S. market gains yesterday, with energy issues leading the way following a favorable earnings report from the U.K.’s BP PLC, which headlined a relatively positive dose of earnings results in the region.

Eurozone retail sales fell, matching expectations, though they were higher than anticipated compared to last year. Markit’s Eurozone Composite PMI Index—a gauge of business activity in the services and manufacturing sectors—was unexpectedly revised to faster pace of growth for January, even as contractions in Italy and France continued. The euro traded lower versus the U.S. dollar and bond yields in the region were mixed, with Italian rates rising. The British pound saw some pressure after Markit’s U.K. Services PMI Index declined to a level just above the key 50 mark that is the demarcation point between expansion and contraction.

Stocks in Asia were mixed on the heels of U.S. markets adding to recent gains yesterday, with higher capital expenditures from Google’s parent Alphabet also garnering attention. However, volume was lighter than usual as markets in mainland China, Hong Kong and South Korea were closed for the Lunar New Year. The yen was choppy and Japanese markets ticked higher.

Market Insights 2/4/2019

U.S. equities finished higher in lackadaisical trading amid a dearth of directional-driving headlines, with M&A activity and earnings reports the day’s focus.

Treasury yields and the U.S. dollar were higher amid a light economic calendar that showed a surprising decline in factory orders, while crude oil prices and gold were lower.

The Markets…

The Dow Jones Industrial Average rose 175 points (0.7%) to 25,239 and the S&P 500 Index gained 18 points (0.7%) to 2,725

The Nasdaq Composite increased 84 points (1.2%) to 7,348

In moderate volume, 792 million shares were traded on the NYSE and 2.1 billion shares changed hands on the Nasdaq

WTI crude oil declined $0.70 to $54.56 per barrel and wholesale gasoline lost $0.01 to $1.43 per gallon

The Bloomberg gold spot price declined $4.85 to $1,313.13 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.3% higher at 95.84

Factory orders below estimates

Factory orders shrank 0.6% month-over-month in November, versus expectations of a 0.3% rise, and compared to October’s unrevised 2.1% decrease. Stripping out the volatile transportation component, orders moved 1.3% lower, below October’s lower-revised gain. The final durable goods orders was revised to 0.7% higher m/m for November, compared to the estimate of a 1.5% rise and was higher than October’s 4.3% loss.

Treasuries were lower, as the yields on the 2-year note and the 30-year bond rose 3 basis points to 2.53% and 3.06%, respectively, while yield on the 10-year note gained 4 bps to 2.72%.

While earnings season will continue to garner much of the attention this week as it hits its apex, tomorrow’s economic calendar will offer a look at the important services sector in the form of the ISM non-Manufacturing Index, with economists projecting a slight decline to 57.1 for January from December’s 57.6 level, as well as the Markit’s Services PMI Index for January, forecasted to remain at the preliminary 54.2 reading, but down from the 54.4 posted the month prior.

Europe mixed amid sundry of earnings and news, Asia rises

European equities finished mixed after trading in a narrow range for the session, with investors weighing slowing Chinese growth and last week’s strong January U.S. labor report. Stocks in the region appeared to shrug off an upbeat read on inflation, while the earnings reports were met with mixed reviews. Auto stocks saw some pressure following a series of weak data reports out of China last week, the world’s largest automobile market.

In economic news, December Eurozone producer price inflation fell 0.8%, more than expectations, while a read on investor sentiment within the region, that hit its lowest level in more than four years, and weakening U.K. construction data to were chalked up to concerns surrounding Brexit. U.K. Prime Minister Theresa May reiterated that there will not be a second referendum on Brexit as she seeks to renegotiate the country’s current separation agreement with the European Union. The euro and British pound were lower versus the U.S. dollar and bond yields in the region were mostly higher.

Stocks in Asia finished higher on the heels of last week’s sixth-straight weekly gain for both the Dow and the Nasdaq, with a stronger-than-expected wage figure in the January labor report helping to alleviate concerns of a U.S. recession.

Shares traded in Hong Kong increased slightly after the Caixin Manufacturing PMI Index for China dipped on Friday to 48.3 and slower growth concerns in mainland China continued to generate headlines. President Donald Trump and Chinese Vice Premier Liu He met at the White House last Thursday to cap two days of trade discussions, although President Trump said that a final deal will probably have to wait until he meets with Chinese President Xi Jinping later this month.

Stocks in Japan rose, with the yen moving higher, and securities traded in Australia and India traded 0.3% higher. Markets in mainland China were closed for the Lunar New Year, and South Korea’s market was also closed for a holiday.