Stocks Gain as Data Provides Optimism of an Economic Recovery…..

U.S. stocks began September on a positive note, with the S&P 500 and Nasdaq yet again hitting fresh record highs. A plethora of global manufacturing data released today supported growing optimism that the economic recovery persists, led by the U.S. ISM Manufacturing Index that showed output hit the fastest pace since November 2018 as new orders surged to a sixteen-year high. Zoom Video surged on its quarterly results and guidance, Tesla dipped after announcing plans to sell up to $5.0 billion of its stock, and Dow member Walmart rallied on its new membership program. Treasury yields ticked lower as bond prices rose, while the U.S. dollar overcame early losses but remained near a two-year low. Gold and crude oil prices modestly advanced. Asia finished mixed amid a plethora of data and Europe diverged as the busy economic day saw Eurozone consumer price inflation turn negative for the first time in four years.

The Dow Jones Industrial Average rose 216 points (0.8%) to 28,646 and the S&P 500 Index gained 26 points (0.8%) to 3,527, while the Nasdaq Composite advanced 164 points (1.4%) to 11,940. In moderate volume, 814 million shares were traded on the NYSE and 3.5 billion shares changed hands on the NASDAQ. WTI crude oil added $0.15 to $42.76 per barrel and wholesale gasoline gained $0.01 to $1.23 per gallon. Elsewhere, the Bloomberg gold spot price was up $2.30 to $1,970.10 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was up 0.2% at 92.35.

ISM shows U.S. manufacturing growth accelerated, joining host of upbeat global reports…..

The August Institute for Supply Management (ISM) Manufacturing Index showed manufacturing output accelerated more than expected, moving further into expansion territory (a reading above 50). The index rose to 56.0 from July’s unrevised 54.2 level, and versus the Bloomberg forecast of 54.8. The index hit the highest level since November 2018 as new orders jumped 6.1 points to 67.6—the highest level since 2004—and production rose 1.2 points to 63.3. New export orders grew 2.9 points to 53.3, but employment remained in contraction territory despite improving and prices jumped 6.3 points to 59.5. The ISM said after the coronavirus (COVID-19) brought manufacturing activity to historic lows, the sector continued its recovery in August, the first full month of operations after supply chains restarted and adjustments were made for employees to return to work. ISM added that panel sentiment was generally optimistic though to a lesser degree compared to July.

The final August Markit U.S. Manufacturing PMI Index was unexpectedly revised lower to 53.1 from the preliminary level of 53.6, where it was forecasted to remain, but above July’s 50.9 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 ticked 0.1% higher month-over-month (m/m) in July, versus projections of a 1.0% gain, and following June’s unrevised 0.7% drop. Residential spending rose 2.1% m/m though non-residential spending fell 1.2%.

Treasuries rose on the ISM’s report, with the yield on the 2-year note little changed at 0.13%, while the yield on the 10-year note slid 3 basis points (bps) to 0.68% and the yield on the 30-year bond ticked 5 bps lower to 1.43%.

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