Stocks Dig Out of Deep Hole to Finish Higher…..

After what started as another down day for the markets, and quickly accelerated to the downside, with the Dow tumbling over 1,000 points midday, stocks rebounded in the final minutes to post gains for the session. The markets remained on edge regarding the ultimate economic impact of elevated expectations that the Fed may have to aggressively tighten monetary policy to combat persisting inflation pressures. Meanwhile, investors digested a slew of January manufacturing and services reports, which showed output slowed and manufacturing activity continued to perform better than the services sector. Treasuries were mixed in choppy trading and the U.S. dollar gained ground, while gold prices were modestly higher, and crude oil prices fell. Equity news was light ahead of an upcoming flood of earnings reports, as shares of Kohl’s jumped amid news that multiple suitors approached the retailer regarding a takeover, while Halliburton Company topped quarterly estimates and raised its dividend. Europe saw a broad-based decline amid central bank worries and concerns over events in Ukraine, while markets in Asia were mixed.

The Dow Jones Industrial Average rose 99 points (0.3%) to 34,365, the S&P 500 Index increased 12 points (0.3%) to 4,410, and the Nasdaq Composite was 86 points (0.6%) higher at 13,855. In very heavy volume, 6.8 billion shares of NYSE-listed stocks were traded, and 6.9 billion shares changed hands on the Nasdaq. WTI crude oil lost $1.83 to $83.31 per barrel. Elsewhere, the gold spot price traded $8.90 higher to $1,840.70 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—gained 0.3% to 95.90.

The preliminary Markit U.S. Manufacturing PMI Index for January declined to 55.0 from December’s unrevised 57.7 figure, and versus the Bloomberg consensus estimate of a decrease to 56.7, but the index remained in expansion territory as denoted by a reading above 50. The preliminary Markit U.S. Services PMI Index showed growth (above 50) for the key U.S. sector slowed much more than expected, falling to 50.9 from December’s 57.6 figure and compared to forecasts of a drop to 55.4.

When looking at the composite index of output from both sectors, Markit said, “The report added that the slowdown in output growth was broad-based, with both manufacturing and service sector firms reporting near-stalled output as the steep spike in virus cases associated with the Omicron wave meant ongoing supply issues and labor shortages were exacerbated by renewed pandemic related containment measures.”

Treasuries were mixed, as the yield on the 2-year note was down 1 basis point (bp) at 0.98%, while the yield on the 10-year note was flat at 1.75%, and the 30-year bond rate rose 4 bps to 2.10%.

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