Bulls Battle Back, but Uneasiness Remained…..

U.S. equities were able to dig out of an early hole to finish mixed, as investors looked ahead to a busy week on both the economic and earnings fronts. Tomorrow will offer key earnings results from some retail sector heavyweights to put the finishing touches on a strong Q2 earnings season, along with Fed Chairman Jerome Powell’s participation in a town hall discussion. However, conviction remained shaky amid a number of uncertainties, including the festering spread of the Delta variant, media reports suggesting growing support for a sooner-than-expected lift off date for Fed tapering, as well as some softer-than-expected Chinese economic data. Meanwhile, geopolitical concerns flared up after Afghanistan’s government collapsed with the Taliban appearing back in control. The robust economic docket kicked off with a much larger-than-expected deceleration in New York manufacturing growth. News on the equity front was light, but shares of Sonos gained ground after getting a favorable ruling on the first of a series of patent disputes with Google. Treasuries modestly added to Friday’s rally and the U.S. dollar ticked higher, while crude oil prices were lower, and gold increased. European markets fell and stocks in Asia were mixed on some disappointing Chinese data and amid the Delta and geopolitical uneasiness.

The Dow Jones Industrial Average rose 110 points (0.3%) to 35,625, the S&P 500 Index gained 12 points (0.3%) to 4,480, while the Nasdaq Composite decreased 29 points (0.2%) to 14,794. In moderate volume, 752 million shares were traded on the NYSE and 3.9 billion shares changed hands on the Nasdaq. WTI crude oil moved $1.15 lower to $67.29 per barrel. Elsewhere, the gold spot price gained $8.17 to $1,787.91 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—inched 0.1% to the upside to 92.61.

The Empire Manufacturing Index, a measure of activity in the New York region, fell to 18.3 in August from the record high of 43.0 that was posted in July, and compared to the Bloomberg consensus estimate of a decline to 28.5. However, a reading above zero denotes expansion. New orders, employment and inventories all decelerated, but remained comfortably in expansion territory. Prices paid dipped but continued to be well above the zero demarcation point between expansion and contraction, registering a 76.1 reading.

Tomorrow, the economic calendar will start to heat up, beginning with the advance retail sales report for July, expected to show a 0.2% month-over-month (m/m) decline, while sales ex-autos and ex-autos and gas are projected to be up 0.2% and flat, respectively. The Federal Reserve’s industrial production and capacity utilization will come just before the opening bell, with economists anticipating production to have increased 0.5% m/m during July and utilization to have nudged higher to 75.7%. After the start of trading, the August NAHB Housing Market Index will be released, forecasted to remain at July’s level of 80, with 50 the demarcation point between conditions being good versus poor, and business inventories will round out the day, expected to have increased 0.8% m/m.

Treasuries added to Friday’s rally that came in the wake of the unexpected tumble in August consumer sentiment as reported by the University of Michigan. The yield on the 2-year note was flat at 0.21%, while the yield on the 10-year note declined 2 basis point (bps) to 1.26%, and the 30-year bond rate ticked 1 basis point lower to 1.92%.

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