Stocks End Mixed, but Finish with Weekly Gains…..

U.S. equities finished mixed, with the Dow and S&P 500 modestly pulling back from record high territory, but the major indexes were all able to post solid weekly gains. The markets appeared unsure as to how President Joe Biden’s administration and the composition of Congress will impact fiscal relief, infrastructure spending, ramped-up vaccine rollout measures and the prospect of potentially higher taxes down the road. Disappointing business activity data for January overseas pressured the markets early on, as the reports illustrated the economic impact of reinstated measures globally to combat the persistent rise in COVID-19 cases. However, the U.S. economic calendar seemed to offer hope and limit the losses, as January reads on manufacturing and services sector activity from Markit showed growth unexpectedly accelerated, while existing home sales capped of a strong 2020 after topping forecasts. On the earnings front, Dow members IBM and Intel fell sharply on their results, hampering the Information Technology sector, while CSX saw pressure despite posting relatively favorable results, and shares of Intuitive Surgical suffered after it noted the impact of the COVID-19 pandemic on its business. Treasuries ticked higher, putting slight downward pressure on yields, and the U.S. dollar gained modest ground, while gold fell and crude oil prices trimmed a recent rally. Europe finished mostly lower, and markets in Asia traded to the downside.

The Dow Jones Industrial Average lost 179 points (0.6%) to 30,997, the S&P 500 Index was down 12 points (0.3%) at 3,841, while the Nasdaq Composite rose 12 points (0.1%) to 13,543. In heavy volume, 1.0 billion shares were traded on the NYSE and 5.9 billion shares changed hands on the Nasdaq. WTI crude oil lost $0.86 to $52.27 per barrel. Elsewhere, the Bloomberg gold spot price dropped $15.55 to $1,854.47 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—ticked 0.1% higher to 90.22. Markets were higher for the week, as the DJIA added 0.6%, the S&P 500 increased 1.9%, and the Nasdaq Composite jumped 4.2%.

January business activity unexpectedly accelerates, existing home sales top estimates…..

The preliminary Markit U.S. Manufacturing PMI Index for January improved to 59.1 from December’s unrevised 57.1 figure, surprisingly moving further into expansion territory denoted by a reading above 50. The Bloomberg consensus estimate called for the index to dip to 56.5. Moreover, the preliminary Markit U.S. Services PMI Index showed growth for the key U.S. sector also unexpectedly accelerated, rising to 57.5 from December’s 54.8 figure, and compared to forecasts of a slight decline to 53.4. A reading above 50 also denotes expansion.

Markit noted that private sector businesses in the U.S. indicated a strong start to 2021, as output and new orders rose further. Rates of expansion in business activity accelerated at manufacturers and service providers, with goods producers registering the sharpest upturn in output since August 2014. However, the report noted intensified inflationary pressures as supplier delays and shortages pushed input prices higher and near-term concerns over the impact of the pandemic, notably on demand for consumer-facing services, and rising costs led to the weakest employment reading since July.

Existing home sales ticked 0.7% higher month-over-month (m/m) in December to an annual rate of 6.76 million units, versus expectations of a decline to 6.56 million units from November’s upwardly-revised 6.71 million rate. Existing home sales are up 22.2% y/y.

Of the four major regions, the Northeast and South experienced m/m sales gains, while sales in the Midwest were unchanged and fell in the West. All regions saw sharp gains y/y. Sales of single-family homes and purchases of condominiums and co-ops were both up m/m and y/y. The median existing home price was up 12.9% from a year ago to $309,800, marking the 106th straight month of y/y gains as prices rose in every region. Unsold inventory posted an all-time low of a 1.9-months pace at the current sales rate, down from 2.3-months in November and the 3.0-months pace a year earlier. Existing home sales reflect contract closings instead of signings and account for a large majority of the home sales market.

National Association of Realtors Chief Economist Lawrence Yun said, “Home sales rose in December, and for 2020 as a whole, we saw sales perform at their highest levels since 2006, despite the pandemic,” adding that “What’s even better is that this momentum is likely to carry into the new year, with more buyers expected to enter the market.” Yun also noted that, “Although mortgage rates are projected to increase, they will continue to hover near record lows at around 3%,” and he expects economic conditions to improve with additional stimulus forthcoming and vaccine distribution already underway.

Treasuries ticked higher, as the rate on the 2-year note was little changed at 0.12%, while the yields on the 10-year note and the 30-year bond dipped 2 basis points to 1.08% and 1.85%, respectively.

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