U.S. equities rebounded from yesterday’s slide, as global concerns appeared to cool a bit following some developments overseas. Hong Kong’s leader withdrew a controversial extradition bill, the U.K. parliament voted to block a no-deal Brexit, and Italy approved a coalition government. Treasury yields were mixed and the U.S. dollar fell, showing little reaction to the afternoon release of the Fed’s Beige Book that indicated a continued moderate pace of expansion to the U.S. economy. Meanwhile, crude oil prices jumped and gold added to its rally. In equity news, Tyson Foods was lower after disappointing with its guidance and Starbucks same under pressure on its 2020 outlook. In other economic news, the trade deficit narrowed by a smaller amount than expected and mortgage applications fell.
The Dow Jones Industrial Average (DJIA) rose 237 points (0.9%) to 26,355, the S&P 500 Index added 32 points (1.1%) to 2,938, and the Nasdaq Composite increased 103 points (1.3%) to 7,978. In moderate volume, 749 million shares were traded on the NYSE and 1.8 billion shares changed hands on the Nasdaq. WTI crude oil moved $2.32 higher to $56.26 per barrel and wholesale gasoline was up $0.06 at $1.53 per gallon. Elsewhere, the Bloomberg gold spot price rose $7.54 to $1,554.64 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—fell 0.5% to 98.48.
The trade balance showed that the deficit shrank by a smaller amount than expected to $54.0 billion in July, compared to the Bloomberg estimate of $53.4 billion. June’s deficit was revised higher to $55.5 billion. Exports rose 0.6% month-over-month (m/m) to $207.4 billion, while imports dipped 0.1% to $261.4 billion.
The MBA Mortgage Application Index declined 3.1% last week, following the prior week’s 6.2% drop. The decrease came as a 7.0% fall in the Refinance Index more than offset a 3.6% rise for the Purchase Index. The average 30-year mortgage rate dropped 7 basis points (bps) to 3.87%.
In afternoon action, the Fed released its Beige Book—an anecdotal look at business activity across the nation used by policymakers in preparation for the Central Bank’s next two-day monetary policy meeting set to conclude on September 18th. The report indicated that the U.S. economy continues to expand at a modest pace, and that a majority of businesses remain optimistic despite the heightened trade tensions. Manufacturing and agriculture were the two weak spots within the report. As well, employment remained solid and upward pressure on wages was moderate, while price increases were mild. The report follows yesterday’s move in the ISM Manufacturing Index that showed U.S. output in the sector fell into contraction territory to exacerbate global growth concerns, amplified trade concerns, and as global central banks are easing monetary policy further.
Treasuries were mixed, as the yield on the 2-year note was down 3 bps to 1.43%, while the yield on the 10-year note was flat at 1.47% and the 30-year bond rate rose 1 basis point to 1.96%.
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