U.S. equities were able to resume a rally that came courtesy of increased optimism for near-term rate cuts after yesterday’s Fed meeting, after a brief move lower on escalated geopolitical tensions following a slew of responses from military and congressional leaders, as well as President Trump, on Iran’s actions of shooting down a U.S. drone. Treasury yields came under pressure, with the 10-year note touching levels not seen since 2016, amid a mixed bag of economic news. The U.S. dollar was also lower and crude oil prices were sharply higher amid the increased discord in the Middle East, while gold rallied.
The Dow Jones Industrial Average (DJIA) rallied 249 points (0.9%) to 26,753, the S&P 500 Index increased 28 points (1.0%) to 2,954, and the Nasdaq Composite advanced 64 points (0.8%) to 8,051. In heavy volume, 974 million shares were traded on the NYSE and 2.0 billion shares changed hands on the Nasdaq. WTI crude oil jumped $3.10 to $57.07 per barrel and wholesale gasoline was up $0.05 to $1.79 per gallon. Elsewhere, the Bloomberg gold spot price soared $29.89 to $1,390.27 per ounce, and the Dollar Index— a comparison of the U.S. dollar to six major world currencies—was 0.5% lower at 96.64.
The Conference Board’s Index of Leading Economic Indicators (LEI) for May was unchanged month-over-month (m/m), a tick below the 0.1% Bloomberg projection and compared to April’s downwardly-revised 0.1% gain. Positive contributions from the financial conditions and consumers’ outlook components were offset by declines in the components for stock prices and the manufacturing sector.
Weekly initial jobless claims fell 6,000 to 216,000, compared to estimates of 220,000, with the prior week’s figure being unrevised at 222,000. The four-week moving average increased by 1,000 to 215,750, while continuing claims dropped by 37,000 to 1,662,000, south of estimates of 1,695,000.
The Philly Fed Manufacturing Index (chart) in June fell sharply to 0.3, from the 16.6 posted the month prior, well below expectations of a decline to 10.7 and just barely in expansion territory (a reading above zero).
Treasuries were higher, as the yield on the 2-year note was down 4 basis points (bps) at 1.72%, the yield on the 10-year note declined2 bps to 2.00%, and the 30-year bond rate was 1 basis point lower to 2.53%. Bond yields fell sharply following yesterday’s decision by the Federal Open Market Committee (FOMC) not to raise the target for the fed funds rate, while opening the door wider for the possibility of a near-term rate cut. The 10-year yield briefly fell below the 2.0% mark, its lowest level since late-2016. For a look at the bond markets in the wake of the recent drop in yields.
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