U.S. stocks traded higher, though the NASDAQ was relatively flat, courtesy of a plethora of mostly upbeat earnings reports and as an unexpected jump in Consumer Confidence preceded tomorrow’s Fed monetary policy decision. Treasury yields gained ground as additional reports from the domestic docket showed a rise in home sales and better-than-expected regional manufacturing activity. The U.S. dollar overcame early losses and gold was lower. Overseas, European markets were broadly higher.

The Dow Jones Industrial Average (DJIA) advanced 100 points (0.5%) to 21,613, the S&P 500 Index was 7 points (0.3%) higher at 2,477, and the Nasdaq Composite increased 1 point to 6,412. In moderate to heavy volume, 1.1 billion shares were traded on the NYSE and 1.9 billion shares changed hands on the Nasdaq. WTI crude oil gained $1.55 to $47.89 per barrel and wholesale gasoline was $0.04 higher at $1.57 per gallon. Elsewhere, the Bloomberg gold spot price decreased $4.75 to $1,250.55 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.1% higher at 94.10. The Consumer Confidence Index surprisingly improved to a four-month high of 121.1 in July from the downwardly revised 117.3 in June, and compared to the Bloomberg estimate of a 116.5 reading. Both sentiment toward the present situation expectations of business conditions for the next six months increased. On employment, the labor differential—consumers’ appraisal of jobs being “plentiful” minus being “hard to get”—rose to 16.1 from the 13.6 level posted in June.

The 20-city composite S&P Core Logic Case-Shiller Home Price Index showed a 5.7% gain in home prices y/y in May, versus expectations of a 5.8% increase. Month-over-month (m/m), home prices were up 0.1% on a seasonally adjusted basis for May, below forecasts of a 0.5% gain.

The Richmond Fed Manufacturing Activity Index increased to 14 in July from June’s upwardly revised 11 figure, with a reading above zero denoting expansion, and versus expectations of a 7 reading.

Treasuries finished lower, with the yield on the 2-year note rising 3 basis points (bps) to 1.39%, while the yields on the 10-year note and the 30-year bond rallied 7 bps to 2.33% and 2.91%, respectively.

Today’s data helped yields and the U.S. dollar stabilize after a recent bout of pressure. The Fed began its two-day monetary policy meeting but is not expected to make any policy changes tomorrow amid a lack of updated economic projections and a subsequent press conference by Chair Yellen, who recently offered a more dovish tone.

Schwab Center for Financial Research – Market Analysis Group

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