Stocks Close Turbulent Quarter on a High Note…..

U.S. equities finished higher, as the gains cut into some of September’s losses and closed out a volatile quarter on a positive note. Upbeat global economic data and headlines provided the boost, as encouraging comments from Treasury Secretary Mnuchin and House Speaker Pelosi offered renewed hope that a new fiscal relief deal might come to fruition, however differences remain. Stronger-than-expected Chinese manufacturing and ADP private sector employment reports, along with a jump in Chicago manufacturing growth also provided support. Moreover, healthcare companies, Regeneron Pharmaceuticals and Moderna announced positive news on the COVID-19 treatment/vaccine front as virus infections continue to rise globally. The markets largely shrugged off last night’s heated first presidential debate that failed to deliver much clarity on either candidate’s plans. Treasury yields rose as bond prices declined and the U.S. dollar dipped. Gold was down and crude oil prices were higher. However, Dow member Walt Disney announced 28,000 job cuts and Micron Technology’s disappointing guidance overshadowed its upbeat earnings results. Asia finished mixed and Europe closed lower following a choppy trading session.

The Dow Jones Industrial Average rose 329 points (1.2%) to 27,782, the S&P 500 Index gained 28 points (0.8%) to 3,363, and the Nasdaq Composite increased 82 points (0.7%) to 11,168. In heavy volume, 1.3 billion shares were traded on the NYSE and 4.2 billion shares changed hands on the NASDAQ. WTI crude oil added $0.93 to $40.22 per barrel and wholesale gasoline was $0.01 higher at $1.18 per gallon. Elsewhere, the Bloomberg gold spot price lost $11.03 to $1,887.05 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was down 0.1% at 93.82.

ADP private sector employment tops forecasts, regional manufacturing growth surges

The ADP Employment Change Report showed private sector payrolls rose by 749,000 jobs in September, above the Bloomberg forecast calling for a 649,000 gain. August’s rise of 428,000 jobs was revised to a 481,000 increase. Today’s ADP data, which does not include government hiring and firing, comes ahead of Friday’s broader September nonfarm payroll report, expected to show headline employment grew by 850,000 jobs and private sector jobs rose by 875,000 economic calendar. The unemployment rate is forecasted to decline to 8.2% from 8.4% and average hourly earnings are projected to rise 0.2% month-over-month (m/m), and be up 4.8% y/y.

The final look (of three) at Q2 Gross Domestic Product, the broadest measure of economic output, showed a quarter-over-quarter (q/q) annualized rate of contraction of 31.4%, revised from the first revision of a 31.7% drop, where it was forecasted to remain. Q1’s output was unrevised at a 5.0% decline. Personal consumption was also revised favorably to a 33.2% drop, versus expectations to remain at a 34.1% fall and Q1 consumption was unrevised at a 6.9% decline.

On inflation, the GDP Price Index was revised to a 1.8% decline versus estimates to be unrevised at a 2.0% drop, and the core PCE Index, which excludes food and energy, was adjusted to a 0.8% decrease, versus forecasts to be unrevised at a 1.0% decline.

The Chicago PMI rose much more than expected and moved further into a level depicting expansion (a reading above 50). The index jumped to 62.4 in September from August’s 51.2 level, and versus forecasts calling for a rise to 52.0.

The MBA Mortgage Application Index declined by 4.8% last week, following the prior week’s 6.8% increase. The decline came as a 6.5% drop in the Refinance Index was accompanied by a 1.9% decrease for the Purchase Index. The average 30-year mortgage rate fell 5 basis points (bps) to 3.05%.

Pending home sales continued to rebound, rising 8.8% m/m in August, versus estimates calling for a 3.1% gain after July’s 5.9% increase. Sales were 20.5% higher y/y, compared to the expected 17.6% increase. Pending home sales reflect contract signings and are a gauge of the pipeline of existing home sales.

Treasuries lost ground, as the yield on the 2-year note was little changed at 0.13%, while the yield on the 10-year note rose 3 bps to 0.68% and the 30-year bond rate advanced 4 bps to 1.46%.

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