U.S. stocks extended the strong start to 2018, touching fresh record highs as tech stocks led the advance, while more strong manufacturing data joined monthly auto sales data that mostly topped forecasts. Treasury yields were mixed and the U.S. dollar managed to gain some ground. Stocks continued to hold higher following the release of the Fed’s minutes from its December meeting. Crude oil prices were solidly higher and gold dipped. In M&A action, Dominion Energy agreed to acquire SCANA Corp for approximately $7.9 billion.
The Dow Jones Industrial Average (DJIA) advanced 99 points (0.4%) to 24,923, the S&P 500 Index gained 17 points (0.6%) to 2,713, and the NASDAQ Composite jumped 59 points (0.8%) to 7,066. In moderately heavy volume, 808 million shares were traded on the NYSE and 2.1 billion shares changed hands on the NASDAQ. WTI crude oil advanced $1.26 to $61.63 per barrel and wholesale gasoline increased $0.04 to $1.80 per gallon. Elsewhere, the Bloomberg gold spot price moved $1.96 lower to $1,315.59 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.3% higher at 92.19.
The Institute for Supply Management (ISM) Manufacturing Index for December rose to 59.7 from 58.2 in November, where the Bloomberg forecast called for it to remain, with a reading above 50 denoting expansion. New orders grew 5.4 points to 69.4 and production rose 1.9 points to 65.8, while employment declined 2.7 points to 57.0 and prices increased 3.5 points to 69.0. Order backlog gained 1.0 points to 56.0 and new export orders rose 2.5 points to 58.5. ISM said comments from respondents reflect expanding business conditions, with new orders and production leading.
At 2:00 p.m. ET, the Federal Reserve released the minutes from its monetary policy meeting that ended on December 13th. The information contained in the report showed that real GDP was forecast to have increased at a solid pace in the second half of last year, while “beyond 2017, the forecast for real GDP growth was revised up modestly, reflecting the staff’s updated assumption that the reduction in federal income taxes expected to begin next year would be larger than assumed in the previous projection.” The staff also noted that it views the uncertainty surrounding its projections for real GDP growth, the unemployment rate and inflation as similar to the average of the past 20 years. Further, “in their discussion of economic conditions and the outlook, meeting participants agreed that information received since the FOMC met in November indicated that economic activity had been rising at a solid rate and that the labor market had continued to strengthen.”
The MBA Mortgage Application Index rose 0.7% last week, following the prior week’s 3.5% decrease. The increase came as a 1.4% rise in the Refinance Index more than offset a 0.1% dip in the Purchase Index. The average 30-year mortgage rate remained at 4.25%.
Treasuries finished mixed, with the yield on the 2-year note gaining 1 basis point to 1.93%, while the yield on the 10-year note lost 2 bps to 2.45% and the 30-year bond rate decreased 3 bps to 2.79%.
Treasury yields gave back some of a recent rally and the U.S. dollar rebounded modestly after seeing pressure as of late, while the stock market remains in record territory to begin the New Year. The markets continue to grapple with the passage of the most sweeping U.S. tax overhaul in decades, synchronized global economic growth, and subdued inflation.
Schwab Center for Financial Research – Market Analysis Group
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