Stocks Recoup Some of Yesterday’s Losses…..

U.S. equities ended the session higher, paring some of yesterday’s tumble with growth-related issues, particularly Information Technology and Communications Services, leading the way after being yesterday’s laggards. The recent pressure has stemmed from a backup in Treasury yields amid intensifying global supply chain challenges, and as expectations ramp up around when the Fed will begin to rein in recent stimulus measures. Meanwhile, a round of September reads on U.S. services activity surprised to the upside, and the trade deficit report came in wider-than-expected. In the wake of the economic data, Treasuries dipped to lift yields and the U.S. dollar gained modest ground, while crude oil prices added to a rally as of late, and gold was lower. In light equity news, PepsiCo topped Q3 earnings forecasts and raised its full-year guidance. Markets in Europe finished higher, getting a boost from the rebound in Information Technology issues, while stocks in Asia were mixed following data and amid signs of further Chinese real estate issues.

The Dow Jones Industrial Average rose 312 points (0.9%) to 34,315, the S&P 500 Index increased 45 points (1.1%) to 4,346, and the Nasdaq Composite gained 178 points (1.3%) to 14,434. In moderate volume, 871 million shares were traded on the NYSE and 4.1 billion shares changed hands on the Nasdaq. WTI crude oil rose $1.31 to $78.93 per barrel. Elsewhere, the gold spot price lost $7.10 to $1,760.50 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—moved 0.2% higher to 93.99.

The trade balance showed that the August deficit widened more than anticipated, increasing to $73.3 billion, from July’s upwardly-revised deficit of $70.3 billion, and compared to the Bloomberg forecast of $70.8 billion. Exports rose 0.5% month-over-month (m/m), and imports increased 1.4%.

The September Institute for Supply Management (ISM) Services Index showed expansion in the key services sector (a reading above 50) rose to 61.9 from August’s 61.7 reading, and versus estimates of a decline to 59.9. The better-than-expected read came as growth in new orders and business activity increased, remaining above 60.0, whereas employment growth saw a modest deceleration. Meanwhile, new export orders fell again but stayed solidly in expansion territory and prices paid recovered somewhat from the prior month’s decline and remained above 75.0. The ISM said, “The slight uptick in the rate of expansion in the month of September continued the current period of strong growth for the services sector. However, ongoing challenges with labor resources, logistics, and materials are affecting the continuity of supply.”

The final Markit U.S. Services PMI Index for September was revised slightly higher to 54.9 from the preliminary estimate of 54.4, where it was expected to remain. The index was down from August’s 55.1 figure. A reading above 50 denotes expansion. Markit’s release is independent and differs from the Institute for Supply Management’s (ISM) report, as it has less historic value and Markit weights its index components differently, while its survey respondents include those that vary more in size, including small and medium-sized companies.

Treasuries were lower with yields volatile as the markets grappled with expectations that the Fed is moving closer to announcing that it will begin to rein in its extraordinary measures put in place to combat the impact of the pandemic, with economic growth fore-casted to be above trend and inflation running hot.

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