Stocks Climb Out of Midday Slump to Finish with Gains…..

U.S. equities finished higher, adding onto yesterday’s late-day rally, as news of more progress on the COVID-19 vaccine front provided the boost. Moderna offered another dose of positive vaccine trial results and reports are suggesting Astrazeneca could deliver upbeat vaccine study data soon. Adding to the bullish tone, Dow member Goldman Sachs trounced the Street’s quarterly expectations, while economic data continued to indicate a recovery in motion. New York manufacturing jumped back into expansion territory by a larger amount than expected and the Fed’s industrial production report showed output was much stronger than projected. Meanwhile, the Fed’s Beige Book, released in afternoon action, also showed promising indications of economic revitalization from the disruption of the pandemic. Treasury yields were mostly higher as bond prices dipped and the U.S. dollar saw modest pressure, while crude oil prices gained ground and gold advanced. Europe finished with broad-based gains, while markets in Asia were mostly higher, with China the lone loser amid heightened tensions between the Asian nation and the U.S.

The Dow Jones Industrial Average rose 228 points (0.9%) to 26,870, the S&P 500 Index increased 29 points (0.9%) to 3,227 and the Nasdaq Composite advanced 62 points (0.6%) to 10,550. In moderately-heavy volume, 909 million shares were traded on the NYSE and 4.4 billion shares changed hands on the NASDAQ. WTI crude oil added $0.91 to $41.20 per barrel and wholesale gasoline gained $0.01 to $1.26 per gallon. Elsewhere, the Bloomberg gold spot price was $2.57 higher at $1,811.93 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was down 0.2% at 96.06.

Manufacturing data jumps, Beige Book shows promising signs of recovery…..

The Federal Reserve’s industrial production (chart) jumped 5.4% month-over-month (m/m) in June, above the Bloomberg estimate of a 4.3% rise, and versus May’s unadjusted 1.4% gain. Despite the sharp rise, total industrial production remains 10.9% below its pre-pandemic February level. Manufacturing output rose 7.2%, continuing the solid rebound from April’s record drop as all major industries posted increases, led by motor vehicles and parts. Utilities output also rose solidly but mining production fell. Capacity utilization rose more than expected to 68.6% from the prior month’s upwardly-revised 65.1% rate, versus forecasts calling for an improvement to 67.8%. Capacity utilization is 11.2 percentage points below its long-run average, but 1.9 percentage points north of the trough during the Great Recession.

The MBA Mortgage Application Index rose 5.1% last week, following the prior week’s 2.2% gain. The increase came as the Refinance Index jumped 11.9%, more than offsetting a 6.1% drop for the Purchase Index. The average 30-year mortgage rate fell 7 basis points (bps) to 3.19%.

The Empire Manufacturing Index, a measure of activity in the New York region, rose to 17.2 in July from –0.2 in June, well above forecasts of an increase to 10.0. A reading of zero is the demarcation point between expansion and contraction.

The Import Price Index rose 1.4% m/m for June, compared to expectations calling for a 1.0% increase and versus May’s downwardly-adjusted 0.8% gain. Compared to last year, prices were down 3.8%, compared to forecasts of a 3.7% fall and versus May’s negatively-revised 6.2% drop.

Finally, in afternoon action, the Fed released its Beige Book report—an anecdotal look at business activity across the nation since May—a tool used by monetary policymakers in preparation for its next two-day meeting scheduled to conclude on July 29th. The report showed signs of a promising recovery at the beginning of July from the disruption of the COVID-19 pandemic and subsequent shutdown of the U.S. economy. “Economic activity increased in almost all Districts, but remained well below where it was prior to the COVID-19 pandemic,” the report noted. Employment increased in almost all Districts as well, while prices were little changed overall.

Treasuries saw some pressure amid the gains seen in the stock markets, bolstered by the latest dose of positive trial data of a potential COVID-19 vaccine. The yield on the 2-year note was little changed at 0.16%, while the yield on the 10-year note rose 2 bp to 0.63% and the 30-year bond rate gained 4 bps to 1.34%.

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