U.S. equities finished the first trading session of the week nearly where they started, as investors appeared to be in wait-and-see mode ahead of an acceleration in Q2 earnings season. Treasury yields dipped, along with crude oil prices, while the U.S. dollar was flat and gold ticked higher. News on the economic front was limited, with manufacturing in the New York region remaining in expansion territory, while data out of China was upbeat.
The Dow Jones Industrial Average (DJIA) ticked 6 points lower to 21,632, the S&P 500 Index was nearly unchanged at 2,459, and the Nasdaq Composite increased 2 points to 6,314. In light to moderate volume, 674 million shares were traded on the NYSE and 1.5 billion shares changed hands on the Nasdaq. WTI crude oil lost $0.52 to $46.02 per barrel and wholesale gasoline was unchanged at $1.56 per gallon. Elsewhere, the Bloomberg gold spot price gained $5.14 to $1,233.84 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was flat at 95.11.
The stock markets are at record highs and Q2 earnings season is set to ramp up, projected to show a growth rate of 6.8%, with nine sectors reporting expansion, led by a sharp rebound in the energy sector, per data compiled by FactSet.
The Empire Manufacturing Index showed output from the New York region slipped but remain in expansion territory (a reading above zero) for July. The index declined to 9.8 from June’s unrevised 19.8 level, with the Bloomberg forecast calling for a reading of 15.0.
Today’s report kicks off the economic week, which will likely share the spotlight with earnings season but bring updates on areas of the economy that have been bright spots. Housing will dominate the docket, beginning with tomorrow’s release of the July NAHB Housing Market Index, with economist expecting the read of homebuilders’ view of the housing market to remain at June’s level of 67, with housing starts and building permits coming later in the week. Moreover, we are getting the first look at manufacturing activity for July, as the Empire Manufacturing Index will be followed by the Philly Fed Manufacturing Index. The week will culminate with the Index of Leading Economic Indicators, which is projected to continue to indicate further economic expansion. Tomorrow’s docket will also include the Import Price Index.
Treasuries finished higher, as the yields on the 2-year and 10-year notes, as well as the 30-year bond, all declined 2 basis points (bps) to 1.35%, 2.31% and 2.90%, respectively.
Bond yields and the U.S. dollar slipped last week after rebounding recently, pressured by softer-than-expected inflation and retail sales reports, along with Fed Chair Janet Yellen’s dovish semi-annual monetary policy testimony.
Schwab Center for Financial Research – Market Analysis Group
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