Markets Continue to Rebound…..
U.S. equities finished solidly in the green, carrying over Friday’s bounce to the new week, as the persistent worries surrounding the Delta variant seemed to have moderated somewhat, with Pfizer gaining full FDA approval of its coronavirus vaccine, co-developed with BioNTech. However, the end-of-the-week speech from Fed Chairman Jerome Powell at the Fed’s key Jackson Hole monetary policy symposium looms, with the markets continuing to grapple with the timing, size, and scale of the Central Bank’s tapering of monthly asset purchases. Growth-related sectors—Information Technology, Consumer Discretionary and Communications Services—aided in the move higher, while Energy led the way, paring a recent tumble, as crude oil prices regained some footing following a plunge as of late. Value/cyclical issues—Financials, Materials and Industrials—also rebounded. Treasuries were little changed after the yield curve flattened last week, and the U.S. dollar pared a recent rally, while gold rallied. In economic news, August manufacturing and services sector growth slowed but remaining solidly in expansion territory, and existing home sales rose for a second-straight month. The equity front was relatively quiet, but Pfizer also announced an agreement to acquire the rest of the shares of Trillium Therapeutics that it did not already own. Europe finished higher to trim last week’s slide, with August business activity data in the Eurozone and the U.K strong, while markets in Asia also gained ground.
The Dow Jones Industrial Average rose 216 points (0.6%) to 35,336, the S&P 500 Index gained 38 points (0.9%) to 4,480, and the Nasdaq Composite increased 228 points (1.6%) to 14,943. In moderate volume, 764 million shares were traded on the NYSE and 3.8 billion shares changed hands on the Nasdaq. WTI crude oil jumped $3.50 to $65.64 per barrel. Elsewhere, the gold spot price rallied $22.10 to $1,806.10 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six
The preliminary Markit U.S. Manufacturing PMI Index for August declined to 61.2 from July’s unrevised 63.4 figure but remained solidly in expansion territory as denoted by a reading above 50. The Bloomberg consensus estimate called for the index to dip to 62.0. The preliminary Markit U.S. Services PMI Index showed growth (above 50) for the key U.S. sector decelerated more than expected, declining to 55.2 from July’s 59.9 figure, and compared to forecasts of a dip to 59.2.
Markit said, “Private sector companies across the U.S. signaled a further strong upturn in business activity during August, however, the pace of growth slowed to an eight-month low. Capacity pressures, material shortages and the spread of the Delta variant reportedly weighed on the output expansion.”
Existing home sales increased 2.0% month-over-month (m/m) in July to an annual rate of 5.99 million units, versus expectations of 5.83 million units, after June’s upwardly-revised 5.87 million rate. Existing home sales rose m/m in three of the four major regions, with the fourth remaining level. Compared to last year, two regions saw gains, one witnessed a decline and one was unchanged.
This was the second-straight monthly gain as sales of single-family homes were up m/m but dipped year-over-year (y/y). Purchases of condominiums and co-ops were down m/m but were solidly higher compared to a year ago. The median existing home price was up 17.8% from a year ago to $359,900, marking the 113th straight month of y/y gains as every region recorded price increases. Unsold inventory was at a 2.6-months pace at the current sales rate, up slightly m/m but down sharply from the from the 3.1-months pace a year earlier. Existing home sales reflect contract closings instead of signings and account for a large majority of the home sales market.
National Association of Realtors Chief Economist Lawrence Yun said, “We see inventory beginning to tick up, which will lessen the intensity of multiple offers.” Yun added that, “Much of the home sales growth is still occurring in the upper-end markets, while the mid- to lower-tier areas aren’t seeing as much growth because there are still too few starter homes available. The report also said we should not expect to see home prices drop in the coming months but there is a chance that they will level off as inventory continues to gradually improve. Yun also noted that, “In the meantime, some prospective buyers who are priced out are raising the demand for rental homes and thereby pushing up the rental rates.”
Treasuries were little changed, as the yields on the 2-year and 10-year notes, along with the 30-year bond were flat at 0.22%, 1.25% and 1.87%, respectively. The U.S. dollar pared a recent rally that took the greenback to highs not seen since last fall..
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