Stocks Rally on Recovery Sentiment…..

U.S. stocks closed higher with most sectors ending in the green as the stock markets opened back up following last week’s shortened week. Economic optimism appeared to be the main driver, as carryover from Friday’s stronger-than-expected March Labor Report and today’s robust readings on U.S. services sector growth provided the ballast for the markets. An additional layer of positive sentiment was tacked on as the continued ramp up of COVID-19 vaccinations seemed to further increase expectations of sharp economic and earnings growth in 2021. Most sectors traded higher as the Information Technology sector contributed to the upside move as growth stocks appeared to regain their footing, while stocks tied to economic prosperity also found support. However, the energy sector saw pressure as crude oil prices fell in the wake of last week’s decision from OPEC+ to gradually increase production in the coming months. Treasuries were higher as rates declined, while the U.S. dollar saw noticeable pressure after a recent bounce above some key technical levels. Gold was little changed. Tesla reported better-than-expected Q1 deliveries on Friday and GameStop announced plans to sell some of its common stock. Japan and South Korea gained ground, though India fell, as most international markets across Asia and Europe were closed for holidays.

The Dow Jones Industrial Average rose 374 points (1.1%) to 33,527, the S&P 500 Index increased 58 points (1.4%) to 4,078, and the Nasdaq Composite was up 225 points (1.7%) at 13,706. In moderate volume, 869 million shares were traded on the NYSE and 4.4 billion shares changed hands on the Nasdaq. WTI crude oil lost $2.80 to $58.65 per barrel. Elsewhere, the Bloomberg gold spot price was $0.62 lower at $1,728.25 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—moved 0.5% lower to 92.59.

March services sector activity strong to kick off the week after Friday’s robust job growth…..

The March Institute for Supply Management (ISM) Services Index showed expansion in the key services sector (a reading above 50) accelerated more than expected to 63.7 from February’s 55.3 level, above the Bloomberg consensus forecast of 59.0. The index continued to expand for the tenth month in a row. Growth in new orders and business activity both jumped double-digit percentage points to 67.2 and 69.4, respectively, and employment improved 4.5 points to 57.2, while inflation pressures continued to heat up as prices gained 2.2 points to 74.0.

The ISM said, “Respondents’ comments indicate that the lifting of coronavirus (COVID-19) pandemic-related restrictions has released pent-up demand for many of their respective companies’ services. Production-capacity constraints, material shortages, weather and challenges in logistics and human resources continue to cause supply chain disruption.”

The final Markit U.S. Services PMI Index for March was revised higher than expected to 60.4 from the preliminary estimate of 60.0, and versus forecasts calling for an upward adjustment to 60.2. A reading above 50 denotes expansion. The index was up from February’s 59.8 figure and the 39.8 level a year ago. 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.

Markit noted that increased business activity in the U.S. service sector has reached the steepest pace for almost seven years amid the fastest expansion in new business for six years, reflecting strengthening client demand. The report also noted that firms also registered a renewed rise in new export orders, but rates of input cost and output charge inflation reached fresh record peaks, as firms sought to pass on steep rises in input prices to clients. Markit added that sentiment among service providers about business in the year ahead improved, helping drive employment growth to a three-month high.

Factory orders declined 0.8% month-over-month (m/m) in February, versus estimates of a 0.5% decrease, and compared to January’s upwardly revised 2.7% increase. Durable goods orders—preliminarily reported two weeks ago—were revised unfavorably to a 1.2% decline for February, and excluding transportation, orders were unadjusted at a 0.9% decrease. Finally, nondefense capital goods orders excluding aircraft—considered a proxy for capital spending—were revised down to a 0.9% decline.

Treasuries were higher, as the yield on the 2-year note dipped 2 basis points (bps) to 0.17%, the yield on the 10-year note decreased 1 bp to 1.71%, and the rate on the 30-year bond was little changed at 2.35%.

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