Stocks Maintain Upward Trajectory and Continue Higher…..

U.S. stocks extended recent gains and continued to reach fresh highs, building on yesterday’s strong start to September while displaying resiliency in the face of a lower-than-expected ADP private sector employment report, and ahead of Friday’s key August nonfarm payroll data. The advance comes after yesterday’s flurry of upbeat global manufacturing reports which helped buoy the markets, and a report that the U.S. Centers for Disease Control and Prevention has notified states to prepare for distribution of a COVID-19 vaccine by early November. In other economic news, mortgage applications dipped and factory orders continued to rebound, while the Fed’s Beige Book release highlighted positive, but modest gains in terms of economic activity and noted a modestly optimistic overall outlook. Treasury yields dipped as bond prices pushed higher, and the U.S. dollar rebounded off of a two-year low. Gold saw some pressure, along with crude oil prices. Macy’s advanced on its quarterly results, Dow member Visa offered a look at spending activity in August, and DraftKings announced it had appointed Michael Jordan as a special advisor. Asia finished mixed, while Europe closed broadly higher.

The Dow Jones Industrial Average rose 455 points (1.6%) to 29,101 and the S&P 500 Index gained 54 points (1.5%) to 3,581, while the Nasdaq Composite advanced 117 points (1.0%) to 12,056. In moderate volume, 885 million shares were traded on the NYSE and 4.0 billion shares changed hands on the NASDAQ. WTI crude oil shed $1.25 to $41.51 per barrel and wholesale gasoline lost $0.02 to $1.20 per gallon. Elsewhere, the Bloomberg gold spot price was down $27.69 to $1,942.49 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was up 0.4% at 92.71.

ADP employment report misses, mortgage apps decline, ahead of Fed’s read on economic activity…..

The ADP Employment Change Report showed private sector payrolls rose by 428,000 jobs in August, below the Bloomberg forecast calling for a 1,000,000 gain. July’s rise of 167,000 jobs was revised to a 212,000 increase. Today’s ADP data, which does not include government hiring and firing, comes ahead of Friday’s broader August nonfarm payroll report, expected to show headline employment grew by 1,390,000 jobs and private sector jobs rose by 1,288,000. The unemployment rate is forecasted to decline to 9.8% from 10.2% and average hourly earnings are projected to be flat month-over-month (m/m), and be up 4.5% y/y.

The MBA Mortgage Application Index declined by 2.0% last week, following the prior week’s 6.5% decrease. The drop came as a 3.1% fall in the Refinance Index was accompanied by a 0.2% dip for the Purchase Index. The average 30-year mortgage rate decreased 3 basis points (bps) to 3.08%.

Factory orders rose 6.4% month-over-month (m/m) in July, versus estimates of a 6.1% gain, and matching June’s upwardly-revised increase. This was the third-straight monthly rebound from the historic 13.5% tumble in April which followed the 11.0% fall in March. Stripping out the volatile transportation component, orders grew 2.1%, compared to June’s favorably-adjusted 4.8% rise. Final durable goods orders, preliminarily reported last week, were revised higher to an 11.4% m/m gain for July, and orders for non-defense capital goods excluding aircraft, considered a proxy for business spending, were unadjusted at a 1.9% increase.

Finally, in afternoon action, the Fed released its Beige Book report—an anecdotal look at business activity across the nation since July—a tool used by monetary policymakers in preparation for its next two-day meeting scheduled to conclude on September 16th. The report showed continuing signs of an economic recovery, however added that continued uncertainty and volatility related to the pandemic remain an ever-present theme across the country. Economic activity increased among most Districts, but gains were generally modest and activity remained well below levels prior to the COVID-19 pandemic,” the report noted. Employment increased overall among Districts as well, while prices rose but at a modest pace.

Treasuries mostly ticked higher, with the yield on the 2-year note little changed at 0.13%, while the yield on the 10-year note dipped 2 bps to 0.65% and the 30-year bond rate declined 4 bps to 1.38%.

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