Stocks Higher with S&P 500 On a Roll…..

U.S. equities finished higher across the board to begin Q3, with the S&P 500 continuing to notch record highs following a sharp first half rally. Investors sifted through a slew of manufacturing data from around the globe, with activity in the U.S. and Europe remaining strong in June, while China slowed, and Japanese manufacturing sentiment improved solidly but at a rate that was smaller than expected. Treasuries were mixed after trading in a tight range all session and the U.S. dollar overcame some early sluggishness to finish slightly to the upside. Gold gained ground, and crude oil prices settled higher ahead of the decision by OPEC and its allies, known as OPEC+, to delay a meeting to determine production levels until tomorrow following an objection from the United Arab Emirates. In other economic news, jobless claims continued to decelerate, but construction spending surprisingly fell. On the equity front, Micron Technology, McCormick & Company and Dow member Walgreens Boots Alliance were all lower despite topping the Street’s quarterly forecasts. Europe finished higher amid the economic data, and as investors continued to monitor the Delta coronavirus spreading in parts of the world, while markets in Asia were lower.

The Dow Jones Industrial Average rose 131 points (0.4%) to 34,634, the S&P 500 Index increased 22 points (0.5%) to 4,320, while the Nasdaq Composite ticked 18 points (0.1%) higher to 14,522. In moderate volume, 825 million shares were traded on the NYSE and 4.3 billion shares changed hands on the Nasdaq. WTI crude oil rose $1.76 to $75.23 per barrel. Elsewhere, the Bloomberg gold spot price increased $4.90 to $1,776.50 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—advanced 0.2% to 92.58.

June manufacturing output remains robust, jobless claims decelerate more than expected…..

The June Institute for Supply Management (ISM) Manufacturing Index showed manufacturing growth (a reading above 50) decelerated more than expected but remain solid. The index declined to 60.6 from May’s unrevised 61.2 level, and versus the Bloomberg consensus estimate of a dip to 60.9. The index slipped modestly as growth in new orders slowed slightly but remained well above 60, along with backlog of orders. Production growth accelerated back above 60, new export orders ticked higher and continued to depict solid growth, and employment dipped back below 50. Prices continued to surge, jumping above the 90 mark and the highest since July 1979.

The ISM said, “panelists reported that their companies and suppliers continue to struggle to meet increasing levels of demand. Record-long raw-material lead times, wide-scale shortages of critical basic materials, rising commodities prices and difficulties in transporting products are continuing to affect all segments of the manufacturing economy. Worker absenteeism, short-term shutdowns due to parts shortages, and difficulties in filling open positions continue to be issues that limit manufacturing-growth potential. Optimistic panel sentiment remained strong, with 16 positive comments for every cautious comment.”

The final June Markit U.S. Manufacturing PMI Index was unexpectedly revised lower to 62.1 from the preliminary level of 62.6, where it was forecasted to remain, and matching May’s level. A reading above 50 denotes expansion and Markit noted that the data signaled the “joint-fastest improvement in the health of the U.S. manufacturing sector on record.” The report noted that the upturn was supported by further marked expansions in output and new orders, but supply chain disruptions worsened and weighed on production capacity.

Input costs meanwhile showed the largest jump on record, feeding through to another record rise in factory selling prices. However, the report also said hopes of a sustained period of strong client demand strengthened output expectations, as the degree of confidence reached a seven-month high. The release is independent and differs from the ISM’s report, as it has less historic value and Markit weights its index components differently, while it surveys a wider range of companies.

Weekly initial jobless claims came in at a level of 364,000 for the week ended June 26, versus forecasts calling for 388,000 and compared to the prior week’s upwardly-revised 415,000 level. The four-week moving average fell by 6,000 to 392,750, and continuing claims for the week ended June 19 rose by 56,000 to 3,469,000, above estimates of 3,340,000. The four-week moving average of continuing claims fell by 75,000 to 3,481,750.

Construction spending declined 0.3% month-over-month (m/m) in May, versus projections of a 0.4% gain, and following April’s downwardly-revised 0.1% increase. Residential spending rose 0.2% m/m but non-residential spending fell 0.7%.

Treasuries were mixed, as the yield on the 2-year gained 1 bp to 0.26%, while the yield on the 10-year note was flat at 1.47% and the rate on the 30-year bond lost 2 bps to 2.07%.

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