Stocks Close Out Holiday-Shortened Week on an Up note…..

In the week’s final trading session ahead of the long holiday weekend, U.S. equities finished higher, further extending a sharp rally, boosted by a second-straight month of stronger-than-expected nonfarm payroll data that appeared to bolster optimism of the economic recovery. Progress out of the Health Care sector to find an answer to the COVID-19 pandemic also aided in the updraft, but the omnipresent uncertainty regarding the recent surge in new cases tempered the enthusiasm, bringing stocks well off their highs of the day. Treasury yields were little changed in a shortened session, while the U.S. dollar, gold and crude oil prices traded higher. In other economic news, initial jobless claims continued to moderate but remain starkly elevated, the trade deficit widened more than anticipated, and factory orders missed estimates. On the equity front, Nu Skin Enterprises rallied after raising its revenue outlook, Tesla extended a recent surge, after posting stronger-than-expected Q2 deliveries, to become the world’s most valuable automaker, and American Airlines headlined a list of air carriers that reached an agreement on loan terms under the CARES Act. Markets in Europe and Asia also saw widespread gains.

The Dow Jones Industrial Average rose 92 points (0.4%) to 25,827, the S&P 500 Index increased 14 points (0.5%) to 3,130 and the Nasdaq Composite gained 53 points (0.5%) to 10,208. In moderately heavy volume, 888 million shares were traded on the NYSE and 4.0 billion shares changed hands on the NASDAQ. WTI crude oil gained $0.83 to $40.65 per barrel and wholesale gasoline added $0.04 to $1.26 per gallon. Elsewhere, the Bloomberg gold spot price advanced $5.27 to $1,775.36 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—ticked 0.1% higher to 97.28. Markets finished higher for the week, as the DJIA advanced 3.2%, the S&P 500 jumped 4.0%, and the Nasdaq Composite rallied 4.6%.

June Labor Report paints recovery picture, and jobless claims continue to moderate but….

Nonfarm payrolls jumped by 4,800,000 jobs month-over-month (m/m) in June, compared to the Bloomberg forecast of a 3,230,000 rise, and following May’s upwardly-adjusted gain of 2,699,000. Excluding government hiring and firing, private sector payrolls grew by 4,767,000, versus the forecasted rise of 3,000,000 after advancing by an upwardly-revised 3,232,000 in May. The labor force participation rate rose to 61.5% from May’s 60.8% rate, versus an expected increase to 61.2%.

The report noted that employment within the leisure and hospitality sectors rose sharply, while notable gains were also seen within the retail trade, education and health services, other services, manufacturing, and professional and business services sectors. Additionally, the report pointed out the mining sector continued to decline.

The unemployment rate fell to 11.1% from May’s 13.3% rate, versus forecasts of a decline to 12.5%. Average hourly earnings fell 1.2% m/m, versus projections of a 0.8% decline and compared to May’s unrevised 1.0% drop. Y/Y, wages were 5.0% higher, below estimates of a 5.3% increase. Finally, average weekly hours dipped to 34.5 from May’s unrevised 34.7, matching forecasts.

In a more-timely look at the employment picture, weekly initial jobless claims came in at a level of 1,427,000 for the week ended June 27th, north of estimates of 1,350,000, and compared to the prior week’s upwardly-revised 1,482,000 level. The four-week moving average fell by 117,500 to 1,503,750, while continuing claims rose by 59,000 to 19,290,000, above of estimates of 19,000,000. The four-week moving average of continuing claims for the week ended June 20th dropped by 494,500 to 19,854,000.

The trade balance showed that the May deficit widened more than expected, coming in at $54.6 billion versus April’s upwardly-revised deficit of $49.8 billion from the originally-reported $49.4 billion, and compared to expectations of $53.2 billion. Exports dropped 4.4% m/m and imports declined 0.9%.

Factory orders(chart) rose 8.0% m/m in May, versus expectations of an 8.6% gain, and compared to April’s negatively-revised 13.5% tumble. Stripping out the volatile transportation component, orders grew 2.6%, below estimates of a 6.5% increase, and compared to April’s unfavorably-adjusted 8.9% drop. Final durable goods orders (chart), preliminarily reported last week, were revised lower to a 15.7% m/m gain for May, and orders for non-defense capital goods excluding aircraft, considered a proxy for business spending, were adjusted down to a 1.6% increase.

Treasuries finished little changed, as the yields on the 2-year and 10-year notes, as well as the 30-year bond were flat at 0.16%, 0.67% and 1.42%, respectively.

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