Stocks Mixed After Giving Back Early Gains…..

U.S. equities closed mixed, after stocks gave back earlier gains in the first trading session of August. Global manufacturing data was the focus early in the day as the markets parsed through largely positive results which added to some initial upbeat sentiment. However, much of that upbeat sentiment fizzled out as investors cautiously kept their eye on the continued spread of the Delta variant of coronavirus and its uncertain impacts on the economy. Earnings reports slowed down today after Q2 earnings season hit its pinnacle last week, as Global Payments bested expectations, while raising its guidance and dividend. In other equity news, Square announced it will acquire Afterpay for $29 billion in stock. Treasuries were higher, putting downward pressure on yields, and the U.S. dollar ticked lower, while gold pushed higher and crude oil prices fell. Asia began the week on a high note and Europe followed suit by closing mostly higher.

The Dow Jones Industrial Average declined 97 points (0.3%) to 34,838, the S&P 500 Index lost 8 points (0.2%) to 4,387, and the Nasdaq Composite increased 8 points (0.1%) to 14,681. In moderate volume, 835 million shares were traded on the NYSE and 3.7 billion shares changed hands on the Nasdaq. WTI crude oil fell $2.69 to $71.26 per barrel. Elsewhere, the gold spot price increased $5.00 to $1,822.20 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—dipped 0.1% to 92.08.

July manufacturing reads mixed but remains robust…..

The July Institute for Supply Management (ISM) Manufacturing Index showed manufacturing growth (a reading above 50) surprisingly decelerated. The index declined to 59.5 from June’s unrevised 60.6 level, and versus the Bloomberg consensus estimate of an increase to 60.9. The index slipped as growth in new orders slowed slightly but remained above 60, while production growth dipped back below 60, new export orders also nudged lower, but both continued to depict solid growth. Employment moved out of contraction territory, posting a level of 52.9, while prices remained higher, registering a level of 85.7, but off of the 92.1 mark last month that was the highest reading since July 1979.

The ISM said, “Manufacturing performed well for the 14th straight month, with demand, consumption and inputs registering growth compared to June.” However, “panelists reported that their companies and suppliers continue to struggle to meet increasing demand levels. As we enter the third quarter, all segments of the manufacturing economy are impacted by near record-long raw-material lead times, continued shortages of critical basic materials, rising commodities prices and difficulties in transporting products.”

The final July Markit U.S. Manufacturing PMI Index was unexpectedly revised higher to 63.4 from the preliminary level, and June’s reading, of 63.1, where it was forecasted to remain. A reading above 50 denotes expansion, and Markit noted that July “signaled the most substantial improvement in operating conditions across the U.S. manufacturing sector on record. Overall growth was supported by stronger expansions in output and new orders, with the latter increasing at the second-fastest pace since data collection began in May 2007.” However, “Unprecedented supplier shortages and delays continued to exert upward pressure on input costs and stymie firms’ ability to process incoming new work. As a result, cost burdens rose at a record-breaking rate and the accumulation of backlogs accelerated.”

Construction spending rose 0.1% month-over-month (m/m) in June, versus projections of a 0.4% gain, and following May’s upwardly-revised 0.2% decrease. Residential spending rose 1.1% m/m, but non-residential spending fell 0.7%.

Treasuries were higher, as the yield on the 2-year note dipped 1 basis point to 0.17%, while the yields on the 10-year note and 30-year bond decreased 5 bps to 1.17% and 1.85%, respectively.

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