Stocks Continue to Run…..

U.S. stocks are adding to a recent rally further north of the March lows, with the global markets digesting a host of May manufacturing reports that showed Chinese output expanded, while activity in the U.S., Eurozone and U.K. all improved versus April’s severe drop. Progress on the continued reopening of key global economies, massive monetary and fiscal policy support, and further announcements from the Health Care sector on the fight against COVID-19 remain bullish sources, but the markets are grappling with civil unrest in the U.S. over the weekend on the heels of the death of George Floyd. Treasury yields are trading higher as bond prices slide, while the U.S. dollar is falling. Gold is gaining ground and crude oil prices are lower. Eli Lilly and Company announced it has begun the world’s first study of a potential antibody treatment in humans, while Zynga agreed to acquire Turkey-based mobile game producer Peak for $1.8 billion, and Coty announced a strategic partnership with KKR. Asia finished higher and Europe is advancing ahead of this week’s monetary policy decision from the European Central Bank, though volume is lighter than usual as markets in Germany and Switzerland are closed for holidays.

At 10:55 a.m. ET, the Dow Jones Industrial Average is up 0.3%, the S&P 500 Index is rising 0.2%, and the Nasdaq Composite is gaining 0.4%. WTI crude oil is decreasing $0.79 to $34.70 per barrel, Brent crude oil is dipping $0.14 to $37.70 per barrel, and wholesale gasoline is off $0.02 to $1.06 per gallon. The Bloomberg gold spot price is advancing $6.66 to $1,736.99 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—is falling 0.4% to 97.93.

May manufacturing activity improves but remains in contraction territory…..

The May Institute for Supply Management (ISM) Manufacturing Index improved to 43.1 from April’s unrevised 41.5 level—which was the lowest since April 2009—but slightly below the Bloomberg forecast of 43.8. The index remained in contraction territory (a reading below 50) but new orders rose to 31.8 from 27.1, production increased to 33.2 from 27.5, and employment advanced to 32.1 from 27.5, while supplier deliveries and customers’ inventories both declined. The ISM said comments from the survey were cautious three months into the manufacturing disruption caused by the coronavirus (COVID-19) pandemic.

The final Markit U.S. Manufacturing PMI Index was unrevised at the preliminary level of 39.8 for May, versus expectations to be adjusted to 40.0, but above April’s 36.1 level. A reading below 50 denotes contraction. The release is independent and differs from ISM’s report, as it has less historic value and Markit weights its index components differently, while it surveys a wider range of companies.

Construction spending fell but by a smaller amount than expected, declining 2.9% month-over-month (m/m) in April, versus projections of a 7.0% drop, and following March’s downwardly-revised flat reading. Residential spending fell 4.5% m/m and non-residential spending declined 1.8%.

Treasuries are lower, with the yield on the 2-year note little changed at 0.16%, while the yield on the 10-year note is rising 3 basis points (bps) to 0.68% and the 30-year bond rate is gaining 6 bps to 1.47%.

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