Stocks Rebound in Another Bumpy Session…..
U.S. equities were able to finish higher to pare some of yesterday’s declines in another choppy session to begin 2021. However, heightened political uncertainty kept things in check, as key Georgia Senate runoff elections commenced, and concerns remain surrounding the implications of the surging COVID-19 cases globally and a disappointing rollout of vaccines in the U.S. thus far. Information Technology led the way after yesterday’s slide, followed by Energy issues amid a rally in crude oil prices on reports OPEC and its allies, known as OPEC+, reached an agreement regarding production changes in February after talks ran into some hurdles yesterday. The accord came with an unexpected production cut from Saudi Arabia. In economic news, another read on December manufacturing output came in positive, with the ISM Manufacturing Index hitting a level not seen since August 2018. Treasuries fell, lifting yields and providing a boost to Financials, and the U.S. dollar continued its downward spiral, while gold modestly added to yesterday’s rally. On the equity front, Jefferies Financial Group posted upbeat Q4 results and increased returns to shareholders, and GM reported strong Q4 auto sales, while Qualcomm announced its CEO decided to retire after 26 years with the company. Europe finished mostly lower, with Energy issues helping limit the losses, while markets in Asia were mixed.
The Dow Jones Industrial Average rose 168 points (0.6%) to 30,392, the S&P 500 Index was up 26 points (0.7%) at 3,727, and the Nasdaq Composite increased 121 points (1.0%) to 12,819. In heavy volume, 995 million shares were traded on the NYSE and 6.8 billion shares changed hands on the Nasdaq. WTI crude oil jumped $2.31 to $49.93 per barrel. Elsewhere, the Bloomberg gold spot price gained $5.91 to $1,948.81 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was down 0.4% at 89.50.
Another December manufacturing report surprises to the upside…..
The December Institute for Supply Management (ISM) Manufacturing Index showed manufacturing growth (a reading above 50) unexpectedly accelerated. The index rose to 60.7 from November’s unrevised 57.5 level, and versus the Bloomberg consensus estimate of decline to 56.8. This was the highest level since August 2018 as new orders and production growth accelerated, with both figures north of 60, and employment returned to expansion territory. Prices remained elevated, jumping 12.2 points to 77.6, a level not seen since the peak of the last manufacturing expansion cycle reached in the summer of 2018.
The ISM said, “Manufacturing performed well for the seventh straight month, with demand, consumption and inputs registering strong growth compared to November. Labor market difficulties at panelists’ companies and their suppliers will continue to restrict the manufacturing economy expansion until the coronavirus (COVID-19) crisis ends.”
Treasuries were lower, as the yield on the 2-year note inched 1 basis point (bp) higher to 0.12%, the yield on the 10-year note rose 4 bps to 0.95% and the 30-year bond rate gained 5 bps to 1.70%. The U.S. Dollar Index remained at a level not seen since the Spring of 2018.
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