U.S. stocks finished the regular trading session higher with consumer discretionary and health care stocks among the top performers. Domestic economic reports showed a decline in housing starts in April and a stronger-than-expected rise in industrial production. Macy’s quarterly earnings report garnered some bullish attention, while animal health company Zoetis agreed to acquire veterinary instrument maker Abaxis. Treasury yields continued to rise, gold and crude oil prices ticked higher and the U.S. dollar furthered its recent advance.

The Dow Jones Industrial Average (DJIA) increased 63 points (0.3%) to 24,769, the S&P 500 Index gained 11 points (0.4%) to 2,722, and the NASDAQ Composite advanced 47 points (0.6%) to 7,398. In moderate volume, 755 million shares were traded on the NYSE and 2.1 billion shares changed hands on the NASDAQ. WTI crude oil traded $0.15 higher to $71.46 per barrel and wholesale gasoline was $0.02 higher at $2.22 per gallon. Elsewhere, the Bloomberg gold spot price increased $0.16 to $1,290.69 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.2% higher at 93.40.

Housing starts for April fell 3.7% month-over-month (m/m) to an annual pace of 1,287,000 units, below the Bloomberg forecast of a 1,310,000 unit rate. However, March starts were upwardly revised to an annual pace of 1,336,000. Building permits, one of the leading indicators tracked by the Conference Board as it is a gauge of future construction, declined 1.8% m/m in April to an annual rate of 1,352,000, versus expectations of a 1,350,000 pace, and compared to March’s favorably revised 1,377,000 rate. Starts and permits for single-family units ticked higher m/m, but activity for multi-family structures fell, but both were up solidly y/y.

The Federal Reserve’s industrial production report showed a 0.7% m/m gain in April, compared to estimates of a 0.6% gain, and matching March’s upwardly revised increase. This was the third-straight monthly gain as manufacturing production moved higher, while utilities and mining output both rose solidly. The Fed said industrial production was 3.5% higher y/y. Capacity utilization ticked higher to 78.0% from the prior month’s downwardly revised 77.6% rate, and compared to forecasts of 78.4%. Capacity utilization is 1.8 percentage points below its long-run average.

The MBA Mortgage Application Index declined 2.7% last week, following the prior week’s 0.4% dip. The decrease came as a 3.8% drop in the Refinance Index was met with a 2.1% fall for the Purchase Index. The average 30-year mortgage rate nudged 1 basis point lower to 4.77%.

Treasuries finished lower, with the yield on the 2-year note increasing 1 basis point to 2.59%, and the yields on the 10-year note and the 30-year bond ticking 2 basis points higher to 3.10% and 3.22%, respectively.

Treasury yields have seen some renewed momentum, with the 10-year note hitting the highest levels since 2011, while the U.S. dollar has continued to rally to highs not seen since December.

Schwab Center for Financial Research – Market Analysis Group

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