Stocks Bounce on Upbeat Profit Reports…..
The U.S. equity markets finished solidly higher, led by technology shares, paring last week’s rout amid some upbeat earnings from Dow members Goldman Sachs, UnitedHealth and Johnson & Johnson, along with Morgan Stanley. Treasury yields and the U.S. dollar were little changed, despite positive news on the economic front, with industrial production coming in above forecasts, homebuilder sentiment surprising to the upside, and job growth hitting another record high. Meanwhile crude oil prices were higher and gold reversed to the downside.
The Dow Jones Industrial Average (DJIA) rallied 548 points (2.2%) to 25,798, the S&P 500 Index increased 59 points (2.2%) to 2,810, and the NASDAQ Composite jumped 215 points (2.9%) to 7,646. In moderate volume, 789 million shares were traded on the NYSE and 2.6 billion shares changed hands on the NASDAQ. WTI crude oil gained $0.14 to $71.92 per barrel and wholesale gasoline was $0.04 higher at $1.98 per gallon. Elsewhere, the Bloomberg gold spot price fell $1.76 to $1,225.30 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was unchanged at 95.06.
Manufacturing, housing and employment data all top forecasts, job openings hit a fresh record…..
The Federal Reserve’s industrial production report showed a 0.3% month-over-month (m/m) rise in September, compared to the Bloomberg estimate of a 0.2% gain and August’s unrevised 0.4% increase. Manufacturing and mining output both rose, while utilities production was little changed. Capacity utilization remained at the prior month’s unrevised 78.1% rate, versus forecasts of 78.2. Capacity utilization is 1.7 percentage points below its long-run average.
The Labor Department’s Job Openings and Labor Turnover Survey (JOLTS), a measure of unmet demand for labor, unexpectedly rose to a fresh record high of 7.14 million jobs available to be filled in August from July’s upwardly-revised 7.08 million rate, and compared to forecasts calling for a 6.90 million figure. The hiring rate ticked higher to 3.9% from July’s 3.8% pace, and the separation rate held at July’s 3.8% level.
The National Association of Home Builders (NAHB) Housing Market Index showed homebuilder sentiment this month improved to 68 from September’s unrevised 67 level, versus forecasts to dip to 66. A reading of 50 separates good and poor conditions. The NAHB said builders continue to view solid housing demand, fueled by a growing economy and a nearly 50-year low for unemployment. They pointed out that lumber price declines for three straight months from elevated levels earlier this summer have also helped to reduce some cost pressures, but builders will need to manage supply-side costs to keep home prices affordable. Housing has been a source of economic concern as of late and tomorrow we will get a look at September construction activity in the form of the housing starts and building permits. Housing starts are projected to decline 5.6% m/m to an annual rate of 1,210,000 units and building permits are forecasted to rise 2.0% to an annual rate of 1,274,000 units. MBA Mortgage Applications are also on tap.
Treasuries were little changed, as the yield on the 2-year note ticked 1 basis point higher to 2.86%, while the yields on the 10-year note and the 30-year bond were flat at 3.16% and 3.34%, respectively.
The recent jump in yields and flared-up concerns that the Fed may be on the verge of the policy mistake in the face of a host of simmering global risks have been key contributors to the recent rise in volatility, setting the stage for tomorrow’s release of the minutes from the Fed’s September monetary policy decision, which resulted in third rate hike of the year and kept expectations alive regarding a potential December move.
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