Stocks Higher, but Caution Evident…..
U.S. equities finished higher, with the S&P 500 and Nasdaq hitting new highs, but the gains were muted as the markets appeared to become more cautious late in the day ahead of tomorrow’s key August nonfarm payroll report. Investors sifted through a host of data, as jobless claims moderated further and the trade deficit narrowed more than expected, while Q2 productivity was revised lower and labor costs were adjusted higher. On the equity front, Chewy missed profit forecasts, pressuring its shares, while Costco Wholesale posted strong sales, but Hormel Foods noted rising inflationary costs. Treasuries were slightly higher, putting downward pressure on yields, and the U.S. dollar ticked lower, while gold lost modest ground, and crude oil prices rose. Overseas, Europe finished mixed in a lackluster session, as the markets awaited tomorrow’s U.S. employment report, while Asia was mixed as Chinese stocks continued to rebound.
The Dow Jones Industrial Average rose 131 points (0.4%) to 35,444, while the S&P 500 Index increased 13 points (0.3%) to 4,537, and the Nasdaq Composite advanced 22 points (0.1%) to 15,331. In moderate volume, 798 million shares were traded on the NYSE and 3.9 billion shares changed hands on the Nasdaq. WTI crude oil was $1.40 higher at $69.99 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 92.23.
Weekly initial jobless claims came in at a level of 340,000 for the week ended August 28, versus the Bloomberg consensus estimate calling for 345,000 and compared to the prior week’s upwardly-revised 354,000 level. The four-week moving average declined by 11,750 to 355,000, and continuing claims for the week ended August 21 dropped by 160,000 to 2,748,000, south of estimates of 2,808,000. The four-week moving average of continuing claims fell by 58,000 to 2,855,000.
The trade balance showed that the July deficit shrank more than anticipated, declining to $70.1 billion, from June’s downwardly-revised deficit of $73.2 billion, and compared to forecasts of $70.9 billion. Exports rose 1.3% month-over-month (m/m), and imports dipped 0.2%.
Final Q2 nonfarm productivity was revised lower to a 2.1% gain on an annualized quarter-over-quarter (q/q) basis, and versus estimates of an adjustment to a 2.5% increase, from the preliminary report of a 2.3% increase. Q1 productivity was unadjusted at a 4.3% gain. Labor productivity, or output per hour, is calculated by dividing real output by hours worked by all persons, including employees, proprietors, and unpaid family workers, and is a major contributor to the economy’s long-term health and prosperity. Unit labor costs were adjusted to a 1.3% q/q increase, from the preliminary rise of 1.0%, versus forecasts of a revised 0.9% gain. Unit labor costs were unrevised at a decrease of 2.8% in Q1.
Factory orders rose 0.4% m/m in July, versus estimates of a 0.3% gain, and compared to June’s unrevised 1.5% increase. Durable goods orders—preliminarily reported last week—were unrevised at a 0.1% dip for July, and excluding transportation, orders were upwardly-adjusted to a 0.8% advance. Finally, nondefense capital goods orders excluding aircraft—considered a proxy for capital spending—were revised higher from a flat reading to a 0.1% gain.
Treasuries were slightly higher, as the yield on the 2-year note was little changed at 0.21%, while the yield on the 10-year note lost 1 basis point (bp) to 1.29%, and the 30-year bond rate declined 2 bps to 1.90%.
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