Market Three-peat Falls Short…..

U.S. equities finished mixed, with the Nasdaq just missing out on posting a third-straight session of gains, as the markets continued to pare last week’s losses that came courtesy of heightened volatility fueled by retail trading activism. The markets sifted through a slew of mixed global economic data that showed Chinese and European services sector activity struggled more than expected, but U.S. output from the sector accelerated. Meanwhile, private sector job growth easily topped forecasts ahead of Friday’s key nonfarm payroll report. Optimism remained regarding COVID-19 vaccine rollout progress and further fiscal relief. Mega-cap stocks and Google parent Alphabet headlined the earnings front, with both trouncing estimates, while the former’s report included the announcement that Jeff Bezos will transfer out of his role as CEO. Treasuries were lower, fostering some continued steepening of the yield curve, and the U.S. dollar saw a modest downtick, pausing from a recent bounce off multi-year lows. Gold was lower and crude oil prices were higher. Europe finished mixed amid a flood of diverging data, while markets in Asia were higher, except for China.

The Dow Jones Industrial Average rose 36 points (0.1%) to 30,724, the S&P 500 Index was up 4 points (0.1%) at 3,830, while the Nasdaq Composite nudged 2 points lower to 13,611. In heavy volume, 1.0 billion shares were traded on the NYSE and 7.3 billion shares changed hands on the Nasdaq. WTI crude oil rose $0.93 to $55.69 per barrel. Elsewhere, the Bloomberg gold spot price fell $4.35 to $1,833.68 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—moved 0.1% lower to 91.11.

ADP employment read tops forecasts, January service sector growth accelerates…..

The ADP Employment Change Report showed private sector payrolls rose by 174,000 jobs in January, versus the Bloomberg forecast calling for a 70,000 gain. December’s decline of 123,000 jobs was revised to a 78,000 decrease. Today’s ADP data, which does not include government hiring and firing, comes ahead of Friday’s broader January nonfarm payroll report, expected to show headline employment grew by 70,000 jobs and private sector jobs rose by 105,000 after both figures declined in December economic calendar. The unemployment rate is forecasted to remain at 6.7% and average hourly earnings are projected to rise 0.3% month-over-month (m/m) and be up 5.0% y/y.

The labor force participation rate is a figure in Friday’s report that we are paying close attention to as the key to recovery is bringing people back into the labor market who have been forced out and can’t make their way back.

The January Institute for Supply Management (ISM) non-Manufacturing Index showed expansion in the key services sector (a reading above 50) surprisingly accelerated to 58.7 from December’s 57.7 level, and versus forecasts of a decrease to 56.7. The index continued to expand for the eighth month in a row and hit the fastest pace of expansion since February 2019 as growth in new orders rose 3.2 points to 61.8 and employment jumped out of contraction territory, increasing 6.5 points to 55.2. However, the business activity component slipped 0.6 points to 59.9. Prices dipped but remained solidly north of the 60 mark. The ISM said, “Respondents’ comments are more optimistic about business conditions and the economy.” However, various local and state-level COVID-19 restrictions continue to negatively impact companies and industries and production capacity and logistics issues continue to cause supply chain challenges.

The final Markit U.S. Services PMI Index for January was unexpectedly revised higher to 58.3 from the preliminary estimate of 57.5, and versus forecasts of a modest downward adjustment to 57.4. The index was up from December’s 54.8 figure and the 53.4 level a year ago. A reading above 50 denotes expansion. Markit’s release is independent and differs from the Institute for Supply Management’s (ISM) report, as it has less historic value and Markit weights its index components differently, while its survey respondents include those that vary more in size, including small and medium-sized companies.

The MBA Mortgage Application Index rose by 8.1% last week, following the prior week’s 4.1% decrease. The solid rise came as the Refinance Index jumped 11.4%, while the Purchase Index was little changed, ticking 0.1% higher. The average 30-year mortgage rate decreased 3 basis points (bps) to 2.92%.

Treasuries were lower, as the rate on the 2-year note was little changed at 0.12%, while the yield on the 10-year note rose 3 bps to 1.13% and the 30-year bond rate gained 5 bps to 1.92%.

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