U.S. stocks pushed further into fresh record-high territory as the New Year rally for equities extended into its third day with the Dow north of 25,000 for the first time amid a host of upbeat global services sector data and a stronger-than-expected read on domestic employment from ADP ahead of tomorrow’s nonfarm payroll report. In equity news, results from Walgreens Boots Alliance, Macy’s, J.C. Penney and Costco fostered negative results. Treasuries were slightly lower and the U.S. dollar declined, while crude oil prices and gold traded higher.

The Dow Jones Industrial Average (DJIA) advanced 152 points (0.6%) to 25,075, the S&P 500 Index gained 11 points (0.4%) to 2,724, and the NASDAQ Composite increased 12 points (0.2%) to 7,078. In moderately heavy volume, 891 million shares were traded on the NYSE and 2.1 billion shares changed hands on the NASDAQ. WTI crude oil advanced $0.38 to $62.01 per barrel and wholesale gasoline increased $0.01 to $1.81 per gallon. Elsewhere, the Bloomberg gold spot price moved $9.18 higher to $1,322.39 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.3% lower at 91.87.

The ADP Employment Change Report showed private sector payrolls rose by 250,000 jobs in December, above the Bloomberg forecast of a 190,000 gain, while November’s increase of 190,000 jobs was revised to a 185,000 increase. Today’s ADP data, which does not include government hiring and firing, comes ahead of tomorrow’s broader December nonfarm payroll report, expected to show headline and private sector payrolls rose by 190,000 jobs. The unemployment rate is forecasted to remain at 4.1% and average hourly earnings are projected to rise 0.3% month-over-month (m/m).

The final Market U.S. Services PMI Index was revised to 53.7 in December from the preliminary 52.4 level, versus expectations of an upward adjustment to 52.5, but still shy of November’s 54.5 level. A reading above 50 denotes expansion.

Weekly initial jobless claims increased by 3,000 to 250,000, versus expectations calling for a decline to 240,000, with the prior week’s figure being revised higher by 2,000 to 247,000. The four-week moving average rose by 3,500 to 241,750, while continuing claims fell 37,000 to 1,914,000, south of estimates of 1,928,000.

Treasuries finished lower, with the yield on the 2-year note rising 2 basis points (bps) to 1.96%, while the yield on the 10-year note ticked 1 bp higher to 2.45% and the 30-year bond rate was flat at 2.79%.

Additional reports expected on tomorrow’s domestic docket include the trade balance for November, expected to have widened to $50.0 billion from the $48.7 billion shortfall in October, as well as factory orders, which are projected to have increased 1.1% m/m and the ISM non-Manufacturing Index is estimated to show growth remained solid.

Treasury yields continued to rally and the U.S. dollar remained under pressure, while the stock market notched fresh record highs to begin 2018, as market participants continue to grapple with tax reform, synchronized global economic growth, and subdued inflation.

Schwab Center for Financial Research – Market Analysis Group

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