Stocks Dig Out of Early Hole To Close Higher….

U.S. equities closed higher in a tumultuous session that saw equities recover from an early hole. The recent volatility that has embroiled the markets of late continued today as global energy concerns intensified due to increased global supply chain challenges, while the markets continued to ponder the impacts of potential monetary policy tightening. Moreover, persistent drama on Capitol Hill remained a source of uncertainty, but reports began to suggest the potential for short-term fixes could be in the offing with an October 18 debt ceiling deadline looming. However, pockets of optimism remained present as the Delta variant spread seems to be showing signs of rolling over, while ADP reported stronger-than-expected private sector employment growth ahead of Friday’s key September labor report. Treasuries were mixed after a recent backup in yields hamstrung growth-related sectors, but the U.S. dollar gained solid ground. In other economic news, mortgage applications fell. M&A news dominated the equity front, after Boston Scientific agreed to acquire Baylis Medical, and Southwest Gas Holdings agreed to acquire Questar Pipelines from Dominion Energy. Ahead of next week’s unofficial start to Q3 earnings season, Constellation Brands reported strong sales out of its beer and wine and spirits categories, but it missed earnings expectations due to decreased margins. Gold was slightly higher and crude oil prices traded to the downside as oil inventories rose much more than expected. Asia fell broadly and Europe finished with widespread losses.

The Dow Jones Industrial Average rose 102 points (0.3%) to 34,417, the S&P 500 Index increased 18 points (0.4%) to 4,364, and the Nasdaq Composite gained 68 points (0.5%) to 14,502. In moderate volume, 882 million shares were traded on the NYSE and 4.4 billion shares changed hands on the Nasdaq. WTI crude oil fell $1.50 to $77.53 per barrel. Elsewhere, the gold spot price added $0.90 to $1,761.80 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—moved 0.3% higher to 94.21.

The ADP Employment Change Report showed private sector payrolls rose by 568,000 jobs in September, above the Bloomberg forecast calling for a 430,000 gain. August’s rise of 374,000 jobs was revised to a 340,000 increase. Today’s ADP data, which does not include government hiring and firing, comes ahead of Friday’s broader September nonfarm payroll report, expected to show headline employment grew by 488,000 jobs and private sector jobs rose by 450,000.  The unemployment rate is forecasted to dip to 5.1% and average hourly earnings are projected to rise 0.4% month-over-month (m/m) and be up 4.6% y/y.

The MBA Mortgage Application Index declined 6.9% last week, following the prior week’s decrease of 1.1%. The drop came as a 9.6% fall for the Refinance Index was met with a 1.7% decline for the Purchase Index. The average 30-year mortgage rate rose 4 basis points (bps) to 3.14%.

Treasuries are mixed but yields have jumped as of late as the markets grapple with expectations that the Fed is set to begin to rein in its extraordinary measures put in place to combat the impact of the pandemic, with inflation running hot.

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