Stocks Bounce Back on Stimulus Optimism…..

U.S. stocks closed noticeably higher on the heels of yesterday’s late-day collapse. Today’s rally appeared to be spurred on by President Trump somewhat backtracking on earlier comments calling off fiscal relief talks until after the election, and instead calling on lawmakers to offer targeted relief to areas such as the airline industry, as well as support for workers and business that have been impacted by the pandemic. The minutes from the Fed’s September monetary policy meeting were released and again highlighted the Committee’s concern surrounding the pandemic, while mortgage applications rose, and consumer credit contracted. Treasury yields resumed some upward momentum as bond prices fell, while the U.S. dollar took a breather after yesterday’s jump that came amid the political disruption. Crude oil prices pared a recent rally and gold prices gained ground. Levi Strauss rose following its unexpected profit, and Eli Lilly gained ground after announcing it approached the FDA regarding emergency use authorization for its potential COVID-19 antibody therapy. Asia finished mixed as Chinese markets remained closed for an extended holiday and Europe closed mostly lower.

The Dow Jones Industrial Average rose 531 points (1.9%) to 28,303, the S&P 500 Index increased 59 points (1.7%) to 3,419, and the Nasdaq Composite jumped 210 points (1.9%) to 11,365. In moderately-heavy volume, 879 million shares were traded on the NYSE and 3.9 billion shares changed hands on the Nasdaq. WTI crude oil was $0.72 lower at $39.95 per barrel and wholesale gasoline lost $0.04 to $1.20 per gallon. Elsewhere, the Bloomberg gold spot price advanced $9.14 to $1,887.31 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was little changed at 93.64.

Mortgage applications rise, Fed minutes released and consumer credit contracts…..

The MBA Mortgage Application Index rose by 4.6% last week, following the prior week’s 4.8% drop. The increase came as an 8.2% gain in the Refinance Index more than offset a 1.5% decrease for the Purchase Index. The average 30-year mortgage rate fell 4 basis points (bps) to 3.01%.

In afternoon action, the Federal Reserve released the minutes from its September monetary policy meeting, where it formalized a framework shift toward an average inflation target and kept interest rates unchanged. The report showed Committee members felt monetary policy was appropriate at this time, citing a U.S. economy that is “well below” pre-pandemic levels, despite a pick-up in recent months. Moreover, the document noted several officials assumed more fiscal stimulus was on the way and highlighted that a smaller or delayed fiscal support package could slow the pace of recovery. Lastly, the minutes also indicated that Members expect that the disruption will “weigh heavily” on economic activity, while reaffirming its commitment to use its full range of tools to support the economy, but that the path of the economy would depend on the course of the virus.

Consumer credit, released in the final hour of trading, showed consumer borrowing contracted by $7.2 billion during August, well off the $14.0 billion expansion forecasted of economists polled by Bloomberg, while July’s figure was adjusted from the originally-reported increase of $12.3 billion to a $14.7 billion surplus. Non-revolving debt, which includes student loans and loans for vehicles and mobile homes, rose $2.2 billion, 0.1% increase m/m, while revolving debt, which includes credit cards, declined by $9.4 billion, a 0.9% m/m decrease.

Treasuries saw pressure, as the yield on the 2-year note ticked 1 bp higher to 0.15%, while the yield on the 10-year note gained 5 bps to 0.79% and the 30-year bond added 6 bps to 1.59%.

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