Markets Roar Back…..

U.S. equities finished with solid gains, paring a recent rout that took the NASDAQ into correction territory. Technology issues led the way as Dow member Microsoft headlined a flood of mostly positive earnings reports. Treasury yields were higher and the U.S. dollar gained ground amid some weakness in the euro following the European Central Bank’s monetary policy decision. Meanwhile, crude oil prices were mixed and gold was lower.

The Dow Jones Industrial Average (DJIA) jumped 401 points (1.6%) to 24,985, the S&P 500 Index rose 50 points (1.9%) to 2,706, and the NASDAQ Composite rallied 210 points (3.0%) to 7,318. In heavy volume, 1.1 billion shares were traded on the NYSE and 2.7 billion shares changed hands on the NASDAQ. WTI crude oil rose $0.51 to $67.33 per barrel and wholesale gasoline was $0.01 lower at $1.81 per gallon. Elsewhere, the Bloomberg gold spot price decreased $3.57 to $1,230.22 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.2% higher at 96.65.

September preliminary durable goods orders rose 0.8% month-over-month (m/m), compared to the Bloomberg estimate of a 1.5% decline and August’s upwardly-revised 4.6% rise. Ex-transportation, orders were up 0.1% m/m, versus forecasts of a 0.4% rise and compared to August’s upwardly-revised 0.3% gain. Orders for non-defense capital goods excluding aircraft, considered a proxy for business spending, dipped 0.1%, below projections of a 0.5% gain, and the prior month’s figure was revised favorably to a 0.2% decline from the initially reported 0.9% decrease.

Weekly initial jobless claims rose by 5,000 to 215,000, matching estimates, from the prior week’s unrevised 210,000 figure. The four-week moving average was unchanged at 211,750, while continuing claims decreased by 5,000 to 1,636,000, south of estimates of 1,644,000.

The advance goods trade balance unexpectedly widened to a deficit of $76.0 billion in September, from the downwardly-revised $75.5 billion in August, and versus expectations of a $75.1 billion shortfall.

Preliminary wholesale inventories were up 0.3% m/m in September, versus forecasts of a 0.5% gain, and following August’s downwardly-revised 0.9% increase.

Pending home sales rose 0.5% m/m in September, versus projections of a flat reading, and following the downwardly-revised 1.9% decline registered in August. Sales were 3.4% lower y/y, compared to the expected 2.6% drop. Pending home sales reflect contract signings and are a gauge of the pipeline of existing home sales, which posted the sixth-straight monthly decline in September.

The October Kansas City Fed Manufacturing Activity Index showed growth decelerated more than expected, falling to 8 from September’s 13 level, versus forecasts of 14, but a reading above zero denotes expansion.

Treasuries were lower, as the yields on the 2-year and 10-year notes rose 3 basis points (bps) to 2.86% and 3.14%, respectively, while the 30-year bond rate ticked 1 basis point higher to 3.35%.

©2018 Charles Schwab & Co., Inc., Member SIPC. All rights reserved.

Schwab Center for Financial Research (“SCFR”) is a division of Charles Schwab & Co., Inc. The information contained herein is obtained from third-party sources and believed to be reliable, but its accuracy or completeness is not guaranteed. This report is for informational purposes only and is not a solicitation, or a recommendation that any particular investor should purchase or sell any particular security. The investment information mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision. All expressions of opinions are subject to change without notice in reaction to shifting market conditions.