After a choppy session, U.S. equities finished mixed, as some upbeat economic data met omnipresent European political and monetary policy uncertainties. Treasury yields fell and the U.S. dollar turned lower amid a spike in the euro on reports the European Central Bank may debate exiting its stimulus measures this month. Meanwhile, crude oil prices were mixed and gold finished higher.

The Dow Jones Industrial Average (DJIA) declined 14 points (0.1%) to 24,800, the S&P 500 Index inched 2 points (0.1%) higher to 2,749, and the NASDAQ Composite rose 31 points (0.4%) to 7,638. In moderate volume, 877 million shares were traded on the NYSE and 2.0 billion shares changed hands on the NASDAQ. WTI crude oil added $0.77 to $65.52 per barrel, while wholesale gasoline ticked $0.01 lower to $2.11 per gallon. Elsewhere, the Bloomberg gold spot price moved $5.27 higher to $1,297.29 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—declined 0.1% to 93.91.

After declining the prior two months, the May Institute for Supply Management (ISM) non-Manufacturing Index rose more than expected to 58.6, from April’s 56.8 level, and versus the Bloomberg forecast of an improvement to 57.6. A reading above 50 denotes expansion. New orders ticked further north of the 60 mark, while business activity moved back above 60, and employment growth nudged higher. Prices rose 2.5 points to 64.3. Non-manufacturing activity accounts for a large majority of U.S. economic output and the ISM said the majority of respondents are optimistic about business conditions and the overall economy.

The final Markit U.S. Services PMI Index was revised to 56.8 for May from the preliminary estimate of 55.7, where it was forecasted to remain, and above April’s 54.6 level. A reading above 50 denotes expansion. The release is independent and differs from ISM’s report, as it has less historic value and Markit weights its index components differently.

The Labor Department’s Job Openings and Labor Turnover Survey (JOLTS), a measure of unmet demand for labor, posted another record high of 6.70 million jobs available to be filled in April from March’s upwardly revised level of 6.63 million, compared to forecasts calling for a decline to a 6.35 million figure. The hiring rate ticked higher to 3.8% from March’s 3.7% pace, and the separation rate remained at March’s 3.6% level.

Today’s data adds to a string of upbeat economic data, headlined by Friday’s nonfarm payroll report that sparked a rally in the past two sessions, while overshadowing lingering global trade concerns and potentially helping the markets come to grips with the possibility the Fed could accelerate rate hikes.

Treasuries were higher, as the yields on the 2-year note declined 3 basis points (bps) to 2.48%, the yield on the 10-year note lost 2 bps to 2.91%, and the 30-year bond rate ticked 1 bp lower to 3.07%.

Treasury yields gave back some of the gains seen in the past two sessions, while the U.S. dollar reversed lower on resurfacing European political and monetary policy uncertainties. The global markets continue to focus on global trade uneasiness and the high probability that the Fed will announce a rate hike next week. The G-7 summit in Canada is slated for this week, any major Chinese/U.S. trade breakthroughs remain elusive, and attention is being paid to retaliatory measures pledged by Mexico, Canada and the European Union in the wake of last week’s announcement of tariffs on aluminum and steel imports from those regions. Geopolitical uncertainties also remain, with Italian and Spanish political drama continuing following new leadership changes, the June summit between North Korea and the U.S. looks to be back on track, and U.K. Brexit ambiguity continues to linger.

Schwab Center for Financial Research – Market Analysis Group

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