U.S. equities finished higher, notching a third day of solid gains, as fears surrounding the outbreak of the coronavirus continued to cool, while some upbeat services sector domestically and abroad added to the positive sentiment. In addition, private sector payrolls, as reported by ADP, were above forecasts, setting the stage for Friday’s January nonfarm payroll report. Treasury yields were higher, continuing their rebound, and crude oil prices gained ground following a bullish inventory report, while the U.S. dollar and gold edged higher. In earnings news, Disney beat top line estimates, posting its first report since launching its streaming service, but guidance pulled shares lower, and Merck & Co offered mixed results, while Ford fell well short of estimates to the detriment of its shares. Europe and Asia finished with widespread gains.

The Dow Jones Industrial Average rallied 483 points (1.7%) to 29,290, the S&P 500 Index was up 37 points (1.1%) to 3,335 and the Nasdaq Composite increased 41 points (0.4%) to 9,509. In heavy volume, 993 million shares were traded on the NYSE and 2.4 billion shares changed hands on the NASDAQ. WTI crude oil was up $1.14 to $50.75 per barrel and wholesale gasoline added $0.05 to $1.49 per gallon. Elsewhere, the Bloomberg gold spot price increased $3.93 to $1,556.85 per ounce, while the Dollar Index—a comparison of the U.S. dollar to six major world currencies—rose 0.3% to 98.28.

The January Institute for Supply Management (ISM) non-Manufacturing Index rose to 55.5 from December’s 54.9, and versus the Bloomberg forecast of a rise to 55.1, with a reading above 50 denoting expansion. The index hit the highest level since August, as new orders increased to 56.2 from December’s 55.3 level, but employment dipped to 53.1 in January from 54.8 the month prior, and order backlogs continued to contract. The ISM said the respondents noted that conditions are favorable and remained positive about the potential resolution on tariffs, while also noting some concerns about the coronavirus outbreak.

The final Markit U.S. Services PMI Index for January was revised to 53.4 from the preliminary estimate of 53.2, where the Bloomberg forecast had expected it to remain, and above December’s 52.8 level. A reading above 50 denotes expansion. This was the highest level since April 2019 as new orders rose modestly, but new export orders decreased slightly after rising for the first time in five months in December. Employment remained a bright spot, with growth accelerating to levels not seen since July. The release is independent and differs from the Institute for Supply Management’s (ISM) report, as it has less historic value and Markit weights its index components differently, while its survey respondents include those that vary more in company size.

The ADP Employment Change Report showed private sector payrolls rose by 221,000 jobs in January, above the Bloomberg forecast of a 158,000 gain, while December’s increase of 202,000 jobs was revised to a 193,000 rise. Today’s ADP data, which does not include government hiring and firing, comes ahead of Friday’s broader January nonfarm payroll report, expected to show jobs grew by 160,000 and private sector payrolls rose by 150,000. The unemployment rate is forecasted to remain at 3.5% and average hourly earnings are projected to rise 0.3% month-over-month (m/m), and be up 3.0% y/y.

The MBA Mortgage Application Index rose by 0.5% last week, following the prior week’s 7.2% gain. The increase came as a 15.3% rise in the Refinance Index more than offset a 9.5% decline for the Purchase Index. The average 30-year mortgage rate fell 10 basis points (bps) to 3.71%, the lowest level since October 2016.

The trade balance showed that the December deficit widened more than expected, coming in at $48.9 billion versus estimates of $48.2 billion. November’s deficit was revised to a shortfall of $43.7 billion from the originally-reported $43.1 billion.

Treasuries were lower, as the yield on the 2-year note was up 4 bps at 1.45%, the yield on the 10-year note increased 5 bps to 1.65%, and the 30-year bond rate rose 6 bps to 2.14%.

©2020 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.