After overcoming some early morning losses, U.S. stocks never looked back as the major domestic indexes rallied to close with solid gains despite the lingering uncertainty surrounding recent developments in regard to the global trade scene. Treasury yields and the U.S. dollar were higher as reads on the services sector were better than expected. Crude oil prices were higher and gold dipped. In M&A action, France’s AXA agreed to acquire XL Group from approximately $15 billion.

The Dow Jones Industrial Average (DJIA) jumped 337 points (1.4%) to 24,875, the S&P 500 Index rallied 30 points (1.1%) to 2,721, and the NASDAQ Composite gained 73 points (1.0%) to 7,331. In moderately heavy volume, 893 million shares were traded on the NYSE and 2.0 billion shares changed hands on the NASDAQ. WTI crude oil gained $1.32 to $62.57 per barrel and wholesale gasoline added $0.02 to $1.94 per gallon. Elsewhere, the Bloomberg gold spot price dipped $3.11 to $1,319.64 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.1% higher at 90.04.

The February Institute for Supply Management (ISM) non-Manufacturing Index declined by a smaller amount than expected to 59.5, from January’s 59.9, which was the highest since August 2005, and versus the Bloomberg forecast calling for a decrease to 58.9. A reading above 50 denotes expansion. Growth in new orders and business activity both accelerated, moving further above 60, while employment growth decelerated and prices dipped but remained elevated. Non-manufacturing activity accounts for a large majority of U.S. economic output and the ISM said the majority of respondents continued to be positive about business conditions and the economy.

The final Market U.S. Services PMI Index was unrevised at 55.9 in February from the preliminary level, in line with forecasts, and above January’s 53.3 level. A reading above 50 denotes expansion and the release is independent and differs from ISM’s report, as it has less historic value and Market weights its index components differently.

Treasuries dipped, with the yield on the 2-year note rising 2 basis points to 2.24%, while the yields on the 10-year note and the 30-year bond gained 3 basis points to 2.88% and 3.15%, respectively.

Schwab Center for Financial Research – Market Analysis Group

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