Bulls Remain in Control…..

U.S. equities finished solidly higher, extending a rebound to recapture last week’s losses, as the volatility linked to the retail trading turmoil that led the tumble continued to recede. It was another heavy day of earnings reports, with mixed results from PayPal, Qualcomm and eBay, while Dow member Merck & Co’s Q4 report took a back seat to the announcement that its CEO will retire. In other equity news, Dow member Apple is reportedly close to a deal to produce autonomous electric vehicles with Hyundai-Kia. The economic docket delivered some upbeat data points, as jobless claims continued to moderate ahead of tomorrow’s key nonfarm payroll report, and factory orders were revised higher to continue the recovery from the historic plunge last Spring. As well, focus returned to progress on the vaccine rollouts and optimism of a potential next round of fiscal relief measures. Treasuries dipped, putting upward pressure on yields, and the U.S. dollar continued its bounce off multi-year lows reached in 2020, while gold tumbled, and crude oil prices were higher. Europe finished mostly higher, but U.K. stocks lagged after the Bank of England told banks to prepare for the possibility of negative rates, while markets in Asia were lower.

The Dow Jones Industrial Average rose 333 points (1.1%) to 31,056, the S&P 500 Index was up 42 points (1.1%) at 3,872, and the Nasdaq Composite advanced 167 points (1.2%) to 13,778. In heavy volume, 1.0 billion shares were traded on the NYSE and 7.1 billion shares changed hands on the Nasdaq. WTI crude oil rose $0.54 to $56.23 per barrel. Elsewhere, the Bloomberg gold spot price fell $39.67 to $1,794.37 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—moved 0.4% higher to 91.52.

Jobless claims better than expected, Q4 productivity drops, factory orders top forecasts…..

Weekly initial jobless claims came in at a level of 779,000 for the week ended January 30, below of the Bloomberg estimate of 830,000, and compared to the prior week’s downwardly revised 812,000 level. The four-week moving average dipped by 1,250 to 848,250, and continuing claims for the week ended January 23 fell by 193,000 to 4,592,000, south of estimates of 4,700,000. The four-week moving average of continuing claims declined by 120,000 to 4,881,750.

Preliminary Q4 nonfarm productivity fell by 4.8% on an annualized basis, versus expectations of a 3.0% decline, and following the upwardly revised 5.1% increase seen in Q3. Labor productivity, or output per hour, is calculated by dividing real output by hours worked by all persons, including employees, proprietors, and unpaid family workers, and is a major contributor to the economy’s long-term health and prosperity. Unit labor costs rose by 6.8%, versus the forecast calling for an 4.0% gain. Unit labor costs were revised lower to a drop of 7.0% in Q3.

Factory orders rose 1.1% month-over-month (m/m) in December, versus estimates of a 0.7% gain, and compared to November’s upwardly revised 1.3% gain. This was the eighth-straight monthly rebound from the historic 13.5% tumble in April which followed the 11.0% fall in March. Durable goods orders—preliminarily reported last week—were revised higher to a 0.5% gain for December, and excluding transportation, orders were adjusted higher to a 1.1% increase. Finally, nondefense capital goods orders excluding aircraft—considered a proxy for capital spending—were revised higher to a 0.7% gain.

Treasuries dipped, as the rate on the 2-year note was little changed at 0.11%, while the yields on the 10-year note and the 30-year bond ticked 2 basis points higher to 1.14% and 1.93%, respectively.

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