Stocks Continue to Run as Data Fosters Economic Recovery…..

Despite persistent rises in new case counts, U.S. stocks are continuing last week’s sharp rally in a return to action following the long holiday weekend. A much larger-than-expected jump into expansion territory for the ISM non-Manufacturing Index added to a recent string of global economic data that has helped fuel the recent rally, along with the backdrop of the massive amount of monetary and fiscal policy relief measures. Surges out of China and Hong Kong got the ball rolling, while M&A activity is in focus, with Uber Technologies agreeing to acquire Postmates for nearly $2.7 billion and Berkshire Hathaway purchasing substantially all of Dominion Energy’s gas transmission and storage segment assets for roughly $4.0 billion, excluding debt. Treasury yields are rising as bond prices slide, and the U.S. dollar is seeing pressure, while crude oil prices are mixed and gold prices are gaining ground. Europe traded to the upside despite some mixed economic data.

At 12:48 p.m. ET, the Dow Jones Industrial Average is up 1.3%, the S&P 500 Index is gaining 1.4%, and the Nasdaq Composite is advancing 2.2%. WTI crude oil is falling $0.20 to $40.45 per barrel, Brent crude oil is increasing $0.31 to $43.11 per barrel, and wholesale gasoline is off $0.01 at $1.24 per gallon. The Bloomberg gold spot price is $6.79 higher to $1,782.74 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—is falling 0.4% to 96.78.

June services sector activity data improve more than expected…..

The June Institute for Supply Management (ISM) non-Manufacturing Index rose to 57.1 from May’s 45.4, well above the Bloomberg forecast of an improvement to 50.2, with a reading above 50 denoting expansion. The index moved back into expansion territory, as the new orders component jumped to 61.6 from 41.9 and employment rose to 43.1 from 31.8, while the business activity portion of the report surged to 66.0 from 41.0. The ISM said respondents remain concerned about the coronavirus and the more recent civil unrest; however, they are cautiously optimistic about business conditions and the economy as businesses are beginning to reopen.

The final Markit U.S. Services PMI Index for June was revised higher to 47.9 from the preliminary estimate of 46.7, and compared to the expected adjustment to 46.9. The Index improved from May’s 37.5 figure, but a reading below 50 denotes contraction. Markit’s release is independent and differs from the 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, including the small and medium-sized companies.

Treasuries are lower as the stock markets add to the recent rally that has come amid global economic data, amplified by today’s positive service data and employment report last week out of the U.S., which has suggested continued recovery in economic activity. Also, the markets remain buoyed by the backdrop of the continued pledge by the Federal Reserve to maintain, or potentially expand, its unprecedented liquidity measures for as long as it takes to get the economy back to its objectives of full employment and price stability. The yield on the 2-year note is ticking 1 basis point (bp) higher to 0.16%, the yield on the 10-year note is gaining 3 bps to 0.69%, and the 30-year bond rate is also rising 3 bps to 1.46%.

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