Fiscal Relief Hope Pushes Equities Back Near Record Highs…..
U.S. stocks closed higher, as U.S. equities got back on track, again climbing toward record high territory. Hope for further fiscal stimulus was a major catalyst, as renewed optimism that a bipartisan deal could be reached provided a boost. Additional progress on the deployment of several COVID-19 vaccines was also a key theme for today’s market move, however uneasiness regarding the impact of measures being reinstated to combat the persistent rise in virus cases remained a concern. Meanwhile, the Fed’s two-day monetary policy meeting kicked off today, and it reported a moderation in industrial production, while other data showed regional manufacturing growth slowed and import price inflation was cooler than expected. In equity news, Eli Lilly and Company agreed to acquire Prevail Therapeutics, Dow member Apple is reportedly looking to ramp up production of its iPhone, and the FDA offered favorable comments toward Moderna’s potential vaccine. Treasuries dipped, as yields rose, while the U.S. dollar was lower. Gold and crude oil prices were higher. Asia closed mostly lower and Europe finished mixed.
The Dow Jones Industrial Average rose 338 points (1.1%) to 30,199, the S&P 500 Index gained 47 points (1.3%) at 3,695, and the Nasdaq Composite advanced 155 points (1.3%) to 12,595. In heavy volume, 924 million shares were traded on the NYSE and 4.3 billion shares changed hands on the Nasdaq. WTI crude oil was $0.63 higher at $47.62 per barrel and wholesale gasoline added $0.01 to $1.33 per gallon. Elsewhere, the Bloomberg gold spot price rose $26.95 to $1,854.31 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—decreased 0.3% to 90.46.
The Federal Reserve’s industrial production rose 0.4% month-over-month (m/m) in November, just above the Bloomberg estimate of a 0.3% gain, and versus October’s negatively-revised 0.9% increase. Manufacturing output rose and mining output jumped, but utilities production fell. Capacity utilization increased to 73.3% versus forecasts calling for it to match the prior month’s upwardly-revised 73.0% rate. Capacity utilization is 6.5 percentage points below its long-run average, but 9.1 percentage points north of the low set in April.
The Empire Manufacturing Index, a measure of activity in the New York region, declined to 4.9 in December from 6.3 in November, where forecasts called for it to remain. However, a reading above zero denotes growth. The report marks the sixth-straight month of expansion, as employment growth accelerated solidly but the expansion in new orders slowed slightly.
The Import Price Index (chart) ticked 0.1% higher month-over-month (m/m) for November, versus expectations of a 0.3% gain, and compared to October’s unrevised 0.1% dip. Versus last year, prices declined 1.0%, compared to forecasts of a 0.9% decrease and matching October’s unadjusted fall.
Also, the Federal Open Market Committee (FOMC) began its two-day monetary policy meeting today. The FOMC is not expected to make changes to policy, but the markets will likely pay close attention to any guidance on how/if/when it may tweak its asset purchase program amid the threat of near-term disruptions due to rising COVID-19 cases, the recent moves in the Treasury markets, the prospects of an expedited economic recovery as the vaccine gets broadly distributed, and after the European Central Bank boosted its emergency purchase program last week. The FOMC decision will precede monetary policy decisions later in the week from the Bank of England and the Bank of Japan.
Treasuries dipped, with the yield on the 2-year note little changed at 0.12%, while the yields on the 10-year note and 30-year bond increased 2 basis points to 0.91% and 1.65%, respectively.
©2020 Charles Schwab & Co., Inc. All rights reserved. Member SIPC.
Schwab Center for Financial Research (“SCFR”) is a division of Charles Schwab & Co., Inc. The information contained herein is obtained from third-party sources and believed to be reliable, but its accuracy or completeness is not guaranteed. This report is for informational purposes only and is not a solicitation, or a recommendation that any particular investor should purchase or sell any particular security. The investment information mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision. All expressions of opinions are subject to change without notice in reaction to shifting market conditions.