Market Starts this Week with a Rally……

U.S. equities finished with solid gains to start the week, extending Friday’s labor-report-fueled rally, with geopolitical uncertainty continuing to ease within Europe and as the June summit between North Korea and the U.S. looks to be back on track. News on the equity front was dominated by some M&A deals and favorable results on one of Merck’s key drugs. Lingering trade concerns kept gains in check ahead of this week’s G-7 summit, as talks between China and the U.S. over the weekend fell short of any major development. Treasury yields were higher amid a light economic calendar and the U.S. dollar ticked lower, while crude oil and gold prices lost ground.

The Dow Jones Industrial Average (DJIA) increased 178 points (0.7%) to 24,814, the S&P 500 Index advanced 12 points (0.5%) to 2,747, and the NASDAQ Composite rose 52 points (0.7%) to 7,606. In moderate volume, 866 million shares were traded on the NYSE and 2.1 billion shares changed hands on the NASDAQ. WTI crude oil fell $1.06 lower to $64.75 per barrel and wholesale gasoline was down $0.02 at $2.12 per gallon. Elsewhere, the Bloomberg gold spot price moved $1.29 lower to $1,292.11 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—declined 0.2% to 94.03.

Factory orders declined 0.8% month-over-month (m/m) in April, versus the Bloomberg expectation to decline 0.5%, and compared to March’s upwardly revised 1.7% increase. Stripping out the volatile transportation component, orders rose 0.4% and March’s gain was revised higher to 0.5%. April durable goods orders—preliminarily reported two weeks ago—were adjusted to a 1.6% drop from an initially-reported 1.7% fall. Also, nondefense capital goods orders excluding aircraft, a gauge of business spending, were unrevised at the previously-reported 1.0% gain.

Treasuries were lower, as the yield on the 2-year note rose 2 basis points (bps) to 2.51%, while the yields on the 10-year note and the 30-year bond gained 4 bps to 2.94% and 3.08%, respectively.

Schwab Center for Financial Research – Market Analysis Group

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