U.S. equities finished lower, with an early rebound for tech stocks losing steam in late-day action, while attention has shifted to the looming likely highly-contentious reconciliation process for tax reform. Treasury yields were mixed but little changed despite reports showing services sector output remained solid and the trade deficit widened more than expected. Crude oil prices moved higher and gold was lower, while the U.S. dollar also gained ground.
The Dow Jones Industrial Average (DJIA) fell 109 points (0.5%) to 24,181, the S&P 500 Index lost 10 points (0.4%) to 2,629, and the NASDAQ Composite declined 13 points (0.2%) to 6,762. In moderate volume, 885 million shares were traded on the NYSE and 2.1 billion shares changed hands on the NASDAQ WTI crude oil inched $0.15 higher to $57.62 per barrel and wholesale gasoline gained $0.03 to $1.72 per gallon. Elsewhere, the Bloomberg gold spot price decreased $9.39 to $1,266.79 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.2% higher at 93.38.
The November Institute for Supply Management (ISM) non-Manufacturing Index declined to 57.4 from October’s unrevised 60.1 reading, which was only the fourth time in its history above 60 and the highest level since August 2005. The Bloomberg forecast called for a decline to 59.0. A reading above 50 denotes expansion. New orders fell 4.1 points month-over-month (m/m) to 58.7, business activity dipped 0.8 points to 61.4, and employment decreased 2.2 points to 55.3. Prices declined 2 points but remained elevated at 60.7. Non-manufacturing activity accounts for a large majority of U.S. economic output and the ISM said respondents’ comments indicate that the economy and sector will continue to grow for the remainder of the year.
The trade balance (chart) showed that the deficit came in at $48.7 billion in October, compared to estimates of $47.5 billion. September’s deficit was upwardly revised to $44.9 billion. Exports were flat month-over-month (m/m) at $195.9 billion, while imports rose by 1.6% to $244.6 billion.
Treasuries were mixed to little changed, as the yield on the 2-year note increased 1 basis point to 1.84%, while the yield on the 10-year note was flat at 2.35% and the 30-year bond rate lost 1 basis point to 2.73%.
The U.S. dollar modestly extended yesterday’s gain and Treasury yields remain near the top end of the range traded at this year as the markets continue to digest the weekend’s Senate tax reform bill passage and prepare for the expected competitive reconciliation process between the House and Senate as they try to find compromises on some key differences of their bills.
Schwab Center for Financial Research – Market Analysis Group
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