U.S. stocks advanced after a mid-week break in honor of the Independence Day holiday as global trade concerns eased a bit on reports that the U.S. and EU could talk about eliminating auto sector tariffs. The Fed released the minutes from its meeting in mid-June and domestic services sector activity unexpectedly improved. Treasury yields were mixed, the U.S. dollar and crude oil prices were lower and gold ticked higher. Tomorrow, the June labor report will likely command some investor attention, though tariff talk will also grab headlines as the U.S. is scheduled to impose levies on some Chinese imports tomorrow.

The Dow Jones Industrial Average (DJIA) advanced 182 points (0.8%) to 24,357, the S&P 500 Index increased 23 points (0.9%) to 2,737, and the NASDAQ Composite added 84 points (1.1%) to 7,586. In moderate volume, 807 million shares were traded on the NYSE and 1.7 billion shares changed hands on the NASDAQ. WTI crude oil declined $1.20 to $72.94 per barrel and wholesale gasoline was up $0.02 at $2.13 per gallon. Elsewhere, the Bloomberg gold spot price traded $1.74 higher to $1,256.74 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.1% lower at 94.42.

At 2:00 p.m. ET, the Federal Reserve released the minutes from its monetary policy meeting held in mid-June, where it increased the target range for the Fed funds rate to 1.75%-2.00%, as expected. The report revealed that information reviewed for the meeting “indicated that labor market conditions continued to strengthen in recent months, and that real gross domestic product (GDP) appeared to be rising at a solid rate in the first half of the year.” The economic outlook from the staff continued to predict that “the economy would expand at an above-trend pace.” And that “over the 2018-20 period, output was projected to rise further above the staff’s estimate of its potential, and the unemployment rate was projected to decline further below the staff’s estimate of its longer-run natural rate.” In regard to the policy action taken, the Federal Open Market Committee members “judged that continuing along a path of gradual policy firming would balance the risk of moving too quickly, which could leave inflation short of a sustained return to the Committee’s symmetric goal, against the risk of moving too slowly, which could lead to a buildup of inflation pressures or material financial imbalances.”

The June Institute for Supply Management (ISM) non-Manufacturing Index  unexpectedly rose to 59.1, from May’s 58.6 level, and versus the Bloomberg forecast of a dip to 58.3. A reading above 50 denotes expansion. New orders and business activity both rose solidly to levels further north of 60, though employment growth dipped but remained in expansion territory. Prices fell 3.6 points to 60.7. Non-manufacturing activity accounts for a large majority of U.S. economic output and the ISM said respondents continue to be optimistic about business conditions and the overall economy. However, the ISM said there is continued concern relating to tariffs, capacity constraints and delivery.

The ADP Employment Change Report showed private sector payrolls rose by 177,000 jobs in June, below forecasts of a 190,000 gain, while May’s increase of 178,000 jobs was revised to a 189,000 rise.

Weekly initial jobless claims rose by 3,000 to 231,000, versus estimates calling for 225,000, with the prior week’s figure revised higher by 1,000 to 228,000. The four-week moving average grew by 2,250 to 224,500, while continuing claims increased by 32,000 to 1,739,000, north of estimates of 1,718,000.

Treasuries were mixed, with the yield on the 2-year note increasing 3 basis points (bps) to 2.55%, while the yield on the 10-year note was flat at 2.83% and the 30-year bond rate dipped 1 basis point to 2.95%.

Schwab Center for Financial Research – Market Analysis Group

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