Equities Close Mostly Higher as Biden Infrastructure Plan Nears…..
U.S. equities closed out the month of March higher, as the markets anxiously awaited the details of President Joe Biden’s infrastructure spending plan and what potential tax changes could accompany it. Several outlets have reported that the proposal would fall into the $2 trillion range in terms of spending and come with an increase in in the corporate tax rate and the global minimum tax. Meanwhile, Tech issues set the pace for the day while Energy and Financials lagged. Treasury yields resumed a move upward, as bond prices fell, and the U.S. dollar took a break from its recent bounce. Meanwhile, gold snapped higher and crude oil prices slid in advance of tomorrow’s OPEC+ production discussions talks. Economic news yielded mixed results, as private sector jobs as reported by ADP rose but at a slightly slower-than-expected pace, housing continued to disappoint as the recent rise in interest rates pressured mortgage applications and pending home sales, but manufacturing activity in the Chicago region jumped to its highest level since mid-2018. In light equity news, lululemon athletica fell despite posting positive earnings results and guidance. Asia finished mostly lower despite some upbeat Chinese manufacturing data, and Europe closed mostly lower as well as investors awaited the U.S. spending plan details.
The Dow Jones Industrial Average fell 85 points (0.3%) to 32,982, the S&P 500 Index increased 14 points (0.4%) to 3,973, while the Nasdaq Composite was up 201 points (1.5%) at 13,247. In heavy volume 1.2 billion shares were traded on the NYSE and 4.9 billion shares changed hands on the Nasdaq. WTI crude oil was $1.39 lower to $59.16 per barrel. Elsewhere, the Bloomberg gold spot price was up $22.66 at $1,707.86 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—lost 0.1% to 93.22.
Private sector employment increases, mortgage apps fall, pending home sales tumble…..
The ADP Employment Change Report showed private sector payrolls rose by 517,000 jobs in March, versus the Bloomberg consensus forecast calling for a 550,000 gain. February’s increase of 117,000 jobs was revised to a 176,000 rise. Today’s ADP data, which does not include government hiring and firing, comes ahead of Friday’s broader March nonfarm payroll report, expected to show headline employment grew by 650,000 jobs and private sector jobs rose by 638,000 after respective gains of 379,000 and 465,000 that noticeably topped forecasts in February. The unemployment rate is forecasted to decline to 6.0% from last month’s 6.2% and average hourly earnings are projected to rise 0.1% month-over-month (m/m) and be up 4.5% y/y.
The MBA Mortgage Application Index fell by 2.2% last week, following the prior week’s 2.5% decline. The fall came as a 2.5% decline in the Refinance Index was met with a 1.5% decrease in the Purchase Index. The average 30-year mortgage rate jumped 10 basis points (bps) to 3.33%.
In more housing news, pending home sales fell 10.6% m/m in February, versus estimates calling for a 3.0% m/m decline after January’s upwardly revised 2.4% decrease. Sales were 2.7% lower y/y, well short of the 6.5% increase expected, and compared to January’s favorably revised 8.8% increase. Pending home sales reflect contract signings and are a gauge of the pipeline of existing home sales.
Finally, the Chicago PMI accelerated more than expected to move further into expansion territory (a reading above 50) for March. The index rose to 66.3 in March from February’s 59.5 level—which was the highest since the Summer of 2018—versus estimates calling for an increase to 61.0. The higher-than-expected expansion for the index came as new orders, inventories, prices paid and production grew at faster paces, while employment also rose, reversing direction to signal expansion.
Treasuries were lower, as the yield on the 2-year note rose 1 bp to 0.16%, the yield on the 10-year note added 3 bps to 1.74%, and the rate on the 30-year bond increased 4 bps to 2.41.
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