Stocks Mixed Following Three Day Rally…..
After rebounding solidly the past three sessions from last week’s tumble, U.S. stocks closed the afternoon mixed. The markets continued to grapple with positive catalysts of stimulus, improving data and progress on finding a coronavirus treatment. However, the lingering concerns regarding a potential second wave of COVID-19 as new cases continue to be reported in the U.S. and China tamped down optimism. Treasury yields were lower as bond prices moved higher, and the U.S. dollar gained ground. May housing construction activity missed forecasts but mortgage applications continued to be buoyed by the sustained rise in purchases, while Fed Chairman Powell concluded his two-day Congressional monetary policy testimony today. Gold ticked higher and crude oil prices were lower. Oracle missed revenue forecasts, Qualcomm issued upbeat guidance on the 5G rollout, and Groupon posted a smaller-than-expected loss. Asia and Europe both finished the day mixed.
The Dow Jones Industrial Average fell 170 points (0.7%) to 26,120, the S&P 500 Index decreased 11 points (0.4%) to 3,113 and the Nasdaq Composite gained 15 points (0.2%) to 9,911. In moderately-heavy volume, 1.0 billion shares were traded on the NYSE and 4.2 billion shares changed hands on the NASDAQ. WTI crude oil moved $0.42 lower to $37.96 per barrel and wholesale gasoline gained $0.01 to $1.22 per gallon. Elsewhere, the Bloomberg gold spot price rose $1.92 to $1,728.45 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was up 0.2% at 97.12.
Housing construction activity misses, mortgage applications continue to climb…..
Housing starts for May rose 4.3% month-over-month (m/m) to an annual pace of 974,000 units, but below the Bloomberg forecast of 1,100,000 units, and compared April’s upwardly-revised pace of 934,000 units, from the initially-reported 891,000 units, which was the lowest level since February 2015. Moreover, building permits, one of the leading indicators tracked by the Conference Board as it is a gauge of future construction, gained 14.4% m/m to an annual rate of 1,220,000, but south of expectations of 1,245,000 units, and compared to April’s downwardly-revised 1,066,000 rate.
The MBA Mortgage Application Index rose 8.0% last week, following the prior week’s 9.3% gain. The increase came as a 10.3% jump in the Refinance Index was met with a 3.5% rise for the Purchase Index, which has gained for nine-straight weeks to the highest level since January 2009. The average 30-year mortgage rate fell 8 basis points (bps) to 3.30%.
Fed Chairman Jerome Powell concluded his two day Congressional monetary policy testimony in front of the House Financial Services Panel. Powell reiterated that the Central Bank will continue to provide unprecedented support until it is confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals. The commitment from the Fed came as Powell noted that although some recent indicators have pointed to stabilization and in some areas a modest rebound in economic activity, levels of output and employment remain far below pre-pandemic levels and significant uncertainty remains about the timing and strength of the recovery. Chairman Powell continued to downplay a negative interest rate policy and indicated that it would be avoided.
Treasuries were higher after resuming a recent downturn amid the renewed rally for the stock markets and upbeat economic data as of late, as well as optimism of further monetary and fiscal relief measures, and potential COVID-19 treatment. The yield on the 2-year note was down 1 bp at 0.19%, the 10-year note was 3 bps lower at 0.73%, while the 30-year bond rate lost 3 bps at 1.52%.
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