Stocks Mixed, with the Nasdaq Again Posting a Record…..

U.S. equities finished mixed, in choppy trading on the first trading session of September, with the Nasdaq continuing its record-setting pace. Growth-related sectors—Information Technology, Communications Services, and Consumer Discretionary—all saw gains. However, value/cyclical issues—Energy, Financials, Materials and Industrials—came under pressure. The markets analyzed a slew of mixed global economic data, with Chinese manufacturing growth unexpectedly falling into contraction territory, while manufacturing data out of the U.S., Eurozone and the U.K. remained solid. Moreover, crude oil prices were nearly unchanged following a meeting of OPEC and its allies, known as OPEC+, where it agreed to stick with its existing plan of gradual monthly increases in oil production. On the equity front, Campbell Soup Company and PVH Corp both rose on the heels of their earnings reports, while shares of CrowdStrike fell despite exceeding Q2 expectations. In other economic news, ADP’s private sector employment report decisively missed forecasts ahead of Friday’s key nonfarm payroll report, while construction spending rose more than expected and mortgage applications declined. Treasuries were slightly higher, pressuring yields, while the U.S. dollar and gold dipped. Europe finished mostly higher, while markets in Asia were mixed.

The Dow Jones Industrial Average declined 48 points (0.1%) to 35,313, while the S&P 500 Index ticked 1 point higher to 4,524, and the Nasdaq Composite increased 50 points (0.3%) to 15,309. In moderate volume, 832 million shares were traded on the NYSE and 4.2 billion shares changed hands on the Nasdaq. WTI crude oil nudged $0.09 higher to $68.59 per barrel. Elsewhere, the gold spot price lost $0.70 to $1,817.40 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was down 0.2% at 92.47.

The August Institute for Supply Management (ISM) Manufacturing Index showed manufacturing growth (a reading above 50) unexpectedly accelerated. The index rose to 59.9 from July’s unrevised 59.5 level, and versus the Bloomberg consensus estimate of a decrease to 58.5. The index improved as growth in new orders rose further north of 60, while production growth also breached the 60 mark, expansion in new export orders accelerated slightly. Inflation pressures moderated, falling to 79.4 from 85.7 in July and retreating further from the 92.1 mark in June that was the highest reading since July 1979. However, ahead of Friday’s key nonfarm payroll report, the employment component fell back below the 50 mark.

The ISM said, “Manufacturing performed well for the 15th straight month, with demand, consumption and inputs registering month-over-month growth, in spite of unprecedented obstacles. Panelists’ companies and their supply chains continue to struggle to respond to strong demand due to difficulties in hiring and a clear cycle of labor turnover as workers opt for more attractive job conditions. Disruptions from COVID-19, primarily in Southeast Asia, are having dramatic impacts on many industry sectors. Ports congestion in China continues to be a headwind as transportation networks remain stressed. Demand remains at strong levels, despite increased prices for nearly everything.”

The final August Markit U.S. Manufacturing PMI Index was unexpectedly revised slightly lower to 61.1 from the preliminary 61.2 level, where it was forecasted to remain, and below July’s reading of 63.4. A reading above 50 denotes expansion, and Markit noted that August “signaled a marked improvement in the health of the U.S. manufacturing sector. Although slightly softer than that seen in July, the expansion was supported by steep upturns in production and new orders. Nevertheless, output growth was reportedly hampered by capacity constraints and material shortages. Lead times for inputs extended further as cost burdens soared, with the pace of inflation reaching a fresh series high. Although output expectations strengthened, employment growth eased as firms struggled to retain staff and find suitable candidates for current vacancies.”

The ADP Employment Change Report showed private sector payrolls rose by 374,000 jobs in August, well below the Bloomberg forecast calling for a 625,000 gain. July’s rise of 330,000 jobs was revised to a 326,000 increase. Today’s ADP data, which does not include government hiring and firing, comes ahead of Friday’s broader August nonfarm payroll report, expected to show headline employment grew by 748,000 jobs and private sector jobs rose by 652,000. The unemployment rate is forecasted to decline to 5.2% and average hourly earnings are projected to rise 0.3% month-over-month (m/m) and be up 4.0% y/y.

The MBA Mortgage Application Index decreased by 2.4% last week, following the prior week’s 1.6% increase. The decline came as a 3.8% drop for the Refinance Index more than offset a 0.6% rise for the Purchase Index. The average 30-year mortgage rate was unchanged at 3.03%.

Construction spending grew 0.3% month-over-month (m/m) in July, versus projections of a 0.2% gain, and following June’s downwardly-revised flat reading. Residential spending increased 0.5% m/m, and non-residential spending ticked 0.1% higher.

Treasuries were modestly higher, as the yield on the 2-year note was flat at 0.21%, while the yields on the 10-year note and the 30-year bond dipped 1 basis point to 1.30% and 1.92%, respectively.

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