U.S. stocks overcame some early pressure and finished the first trading session of Q3 with gains as global trade concerns continued to fester and divergent reads on global manufacturing activity fostered some concern in regard to growth. Treasuries finished mostly lower and the U.S. dollar continued to grind higher. Crude oil prices and gold ticked to the downside. Please note that all U.S. markets will be closing early tomorrow and remain shuttered on Wednesday in observance of the Independence Day holiday.

The Dow Jones Industrial Average (DJIA) added 36 points (0.1%) to 24,307, the S&P 500 Index gained 8 points (0.3%) to 2,727, and the NASDAQ Composite advanced 57 points (0.8%) to 7,568. In moderate volume, 748 million shares were traded on the NYSE and 1.8 billion shares changed hands on the NASDAQ. WTI crude oil declined $0.21 to $73.94 per barrel and wholesale gasoline was down $0.06 at $2.11 per gallon. Elsewhere, the Bloomberg gold spot price traded $11.51 lower to $1,241.09 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.5% higher at 94.98.

The Institute for Supply Management (ISM) Manufacturing Index for June rose to 60.2 from the unrevised 58.7 in May, versus the Bloomberg forecast calling for a dip to 58.5, with a reading above 50 denoting expansion. The index matched the second-highest level since 2004, with new orders and production remaining above 60, while employment dipped but continued to depict solid growth. Supplier deliveries jumped to lead the way, rising 6.2 points to 68.2. Order backlogs fell but remained slightly above 60 and growth in new export orders accelerated. ISM said respondent comments reflected continued expanding business strength.

The final June Markit U.S. Manufacturing PMI Index was revised higher to 55.4 from the preliminary reading of 54.6, where it was forecasted to remain. A reading above 50 indicates growth in output but the index was below the 56.4 level posted in May. The release is independent and differs from ISM’s manufacturing report, as it has less historic value and Markit weights its index components differently.

Construction spending rose 0.4% month-over-month (m/m) in May, versus projections of a 0.5% increase, and following April’s downwardly revised 0.9% gain. Residential spending grew 0.8% m/m, and non-residential spending ticked 0.1% higher.

Today’s manufacturing reports diverged from reports out of Japan, China and the Eurozone, and commenced a fully-loaded economic docket this week, which will be shortened by the Independence Day holiday. Domestic reports will culminate with Friday’s nonfarm payroll report, with an eye on the inflation component of wage growth likely garnering the most scrutiny amid the current economic and monetary policy backdrops.

Treasuries finished mostly unchanged, with the yield on the 2-year note rising 2 basis points to 2.55%, the yield on the 10-year note ticking nearly 1 bp higher to 2.87%, while the 30-year bond was nearly unchanged at 2.99%.

Schwab Center for Financial Research – Market Analysis Group

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