Stocks Close Out Strong Quarter With a Gain…..

U.S. stocks finished higher to post a sharp Q2 surge with the major averages posting the best quarterly gains in multiple decades amid the unprecedented volatility seen in the first half of 2020. Equities showed resiliency in the face of worries over the spiking new cases of COVID-19 that is threatening economic reopening progress. Technology issues continued to do the heavy lifting, finding extra strength from upbeat Q3 results and Q4 guidance from Micron Technology. However, the advance for the Dow was limited by weakness in Boeing after one of its largest European customers cancelled all remaining jet orders. M&A was in focus as Lululemon rallied after agreeing to acquire home fitness company MIRROR. Economic data was mixed, with Consumer Confidence improving more than expected but the contraction in Chicago manufacturing output was faster than projected. Treasury yields gained ground as bond prices slipped in the wake of Congressional testimony from Federal Reserve Chairman Jerome Powell and Treasury Secretary Steven Mnuchin. The U.S. dollar declined and gold rose to near an eight-year high. Europe traded mostly lower as energy stocks fell as crude oil prices slipped and Royal Dutch Shell projected a record write down that could reach $22.0 billion. Asia was mostly higher, aided by some stronger-than-expected Chinese manufacturing and services data.

The Dow Jones Industrial Average rose 217 points (0.9%) to 25,813, the S&P 500 Index increased 47 points (1.5%) to 3,100 and the Nasdaq Composite advanced 185 points (1.9%) to 10,059. In moderately-heavy volume, 1.2 billion shares were traded on the NYSE and 4.4 billion shares changed hands on the NASDAQ. WTI crude oil declined $0.43 to $39.27 per barrel and wholesale gasoline increased $0.01 to $1.20 per gallon. Elsewhere, the Bloomberg gold spot price advanced $8.40 to $1,781.22 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was down 0.2% at 97.36.

Consumer Confidence improves, regional manufacturing misses, Fed Chief testifies…..

The Conference Board’s Consumer Confidence Index rose to 98.1 in June, from May’s downwardly-revised 85.9 level, and versus the Bloomberg estimate calling for an improvement to 91.5. The index improved as both the Present Situation Index and the Expectations Index of business conditions for the next six months bounced. On employment, the labor differential—consumers’ appraisal of jobs being “plentiful” minus being “hard to get”—increased to -3.0 from the -12.7 level posted in May.

The Chicago PMI improved by a smaller amount than expected and remained at a level depicting contraction (a reading below 50). The index increased to 36.6 in June from May’s 32.3 level, and versus forecasts calling for an increase to 45.0. The index rebounded modestly from the lowest level since the early 1980s as contractions in new orders and production both slowed, but employment fell at a faster pace.

The 20-city composite S&P CoreLogic Case-Shiller Home Price Index posted a 4.0% year-over-year (y/y) gain in home prices in April, versus estimates of a 3.8% increase. However, compared to the prior month, home prices were 0.3% higher on a seasonally adjusted basis, missing forecasts of a 0.5% gain.

Finally, the markets paid close attention to today’s Congressional testimony from Fed Chairman Jerome Powell and Treasury Secretary Steven Mnuchin before the House Financial Services Committee. Powell noted how data is illustrating the resumption of economic activity as the world’s largest economy reopens, but stressed the critical need to contain the COVID-19 pandemic, which has the outlook for the economy remaining “extraordinarily uncertain.” Powell also continued to note the potential need for further measures on the fiscal side to combat the disruption of the pandemic and the Central Bank’s willingness to tweak current programs when/if needed. Secretary Mnuchin highlighted the effectiveness of the fiscal relief measures put in place but continued to stress the government’s goal of passing another dose of fiscal relief by the end of July. Powell held onto the stance that, “The path forward will also depend on the policy actions taken at all levels of government to provide relief and to support the recovery for a long as needed.”

Treasuries mostly dipped, with the yield on the 2-year note flat at 0.15%, while the yield on the 10-year note rose 3 basis points (bps) to 0.66% and the 30-year bond rate advanced 4 bps to 1.41%.

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