Deal-making and Data Foster Strong Start to August…..
U.S. stocks advanced solidly in the first session of the month, courtesy of a plethora of M&A headlines and as the ISM Manufacturing Index’s stronger-than-expected July read highlighted a host of upbeat global reports. The markets shrugged off festering uncertainty regarding an expected next wave of fiscal support and the recent flare up in global new cases of COVID-19. Marathon Petroleum sold its Speedway gas stations to 7-Eleven for $21.0 billion in cash, ADT surged on a partnership with Google, and Dow member Microsoft confirmed talks to acquire TikTok’s U.S. operations. Treasury yields rose as bond prices slipped on the favorable manufacturing reports, which kicked off a week that will culminate with Friday’s nonfarm payroll figures. The U.S. dollar rebounded from a recent drop, gold modestly extended a record run, and crude oil prices were higher. Europe traded to the upside and Asia finished mixed.
The Dow Jones Industrial Average rose 236 points (0.9%) to 26,664, the S&P 500 Index increased 23 points (0.7%) to 3,295, and the Nasdaq Composite gained 158 points (1.5%) to 10,903. In moderate volume, 872 million shares were traded on the NYSE and 4.1 billion shares changed hands on the NASDAQ. WTI crude advanced $0.74 to $41.01 per barrel and wholesale gasoline rose $0.04 to $1.21 per gallon. Elsewhere, the Bloomberg gold spot price rose $0.79 to $1,976.65 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—moved 0.2% higher to 93.52.
ISM manufacturing report shows July output stronger than expected to kick off economic week…..
The July Institute for Supply Management (ISM) Manufacturing Index showed a larger-than-expected rise, moving further into expansion territory (a reading above 50). The index rose to 54.2 from June’s unrevised 52.6 level, and versus the Bloomberg forecast of 53.6. The index hit the highest level since March 2019 as new orders and production both showed growth accelerated solidly, and new export orders moved back above the key 50 mark. Employment improved but continued to depict contraction and prices increased 1.9 points to 53.2. The ISM said in July manufacturing continued its recovery after the disruption caused by the coronavirus (COVID-19) pandemic and panel sentiment was generally optimistic, continuing a trend from June.
The final July Markit U.S. Manufacturing PMI Index was unexpectedly revised lower to 50.9 from the preliminary level of 51.3, where it was forecasted to remain, but above June’s 49.8 level. A reading above 50 denotes expansion. The release is independent and differs from ISM’s report, as it has less historic value and Markit weights its index components differently, while it surveys a wider range of companies.
Construction spending surprisingly fell 0.7% month-over-month (m/m) in June, versus projections of a 1.0% gain, and following May’s upwardly-revised 1.7% drop. Residential spending fell 1.4% m/m and non-residential spending dipped 0.2%.
Treasuries were mostly lower to begin the week, with the yield on the 2-year note little changed at 0.11%, while the yield on the 10-year note gained 2 basis points (bps) to 0.55% and the 30-year bond rate rose 3 bps to 1.23%.
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