U.S. stocks finished mixed as the Dow was able to post solid gains, finding support from some upbeat earnings results from 3M and Caterpillar. Shares in energy and tech companies lagged, while the U.S. dollar erased losses on a sharp reversal following comments from President Trump. Treasury yields were mostly lower, crude oil prices dipped and gold saw a minor decline.

The Dow Jones Industrial Average (DJIA) increased 141 points (0.5%) to 26,393, the S&P 500 Index added 2 points (0.1%) to 2,839, and the NASDAQ Composite decreased 4 points (0.1%) to 7,411. In moderate volume, 887 million shares were traded on the NYSE and 2.0 billion shares changed hands on the NASDAQ. WTI crude oil ticked $0.10 lower to $65.51 per barrel and wholesale gasoline shed $0.02 to $1.91 per gallon. Elsewhere, the Bloomberg gold spot price lost $9.82 to $1,348.64 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was nearly unchanged at 89.27.

Weekly initial jobless claims rose by 17,000 to 233,000, versus the Bloomberg expectation calling for a gain to 235,000, with the prior week’s figure being downwardly revised by 4,000 to 216,000. The four-week moving average decreased by 3,500 to 240,000, while continuing claims fell 28,000 to 1,937,000, north of estimates of 1,925,000.

The Conference Board’s Index of Leading Economic Indicators (LEI) for December rose 0.6% month-over-month (m/m), above projections to match November’s upwardly revised 0.5% gain. The index has not seen a decline since May 2016. The stronger-than-expected rise came courtesy of ISM new orders, stock prices, credit, the yield curve and consumer expectations.

New home sales fell 9.3% m/m in December to an annual rate of 625,000 units, versus forecasts calling for 675,000 units and the downwardly revised 659,000 unit pace in November, which remained the highest level since 2007. The median home price was up 2.6% y/y to $335,400. New home inventory jumped to 5.7 months of supply at the current sales pace from 4.9 in November. Sales declined m/m in all regions . New home sales are based on contract signings instead of closings.

The Kansas City Fed Manufacturing Activity Index for January showed growth unexpectedly accelerated, with the index rising to 16 from 14 in December, where it was projected to remain. A reading above zero denotes expansion.

Treasuries finished mostly lower, with the yield on the 2-year note flat at 2.08%, while the yield on the 10-year note declined 3 basis points (bps) to 2.61%, and the 30-year bond rate decreased 5 bps to 2.88%. Treasury yields have rallied recently to multi-year highs and the U.S. dollar has seen an accelerated drop to fresh multi-year lows amid a flare-up in U.S. trade concerns and as global central banks appear to be turning down the path to normalization.

Adding to the backdrop, the stock markets remain at record high levels on broad-based global economic growth and optimism regarding tax reform. Tomorrow, the economic calendar will bring the first look (of three) at Q4 GDP, projected to expand by a quarter-over-quarter annualized rate of 3.0%, on the heels of the growth of 3.2% and 3.1% in Q3 and Q2, respectively. Growth in personal consumption is expected to accelerate from a 2.2% rate in Q3 to a 3.7% pace.

Schwab Center for Financial Research – Market Analysis Group

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