Markets on Four-day Winning Streak…..
The U.S. equity markets notched a fourth-straight day of gains, paring some of the losses that have ushered in a dismal start to 2022. The moves came as investors sifted through a host of earnings reports and economic data. The growth-related Communications Services and Information Technology sectors extended a recent rebound from marked underperformance to start the year, aided by strong earnings results from Google parent, Alphabet, and Advanced Micro Devices, with the former also announcing a 20-for-1 stock split. However, gains for the Tech sector were somewhat tempered by a tumble in shares of PayPal after the company reported disappointing results and guidance. In other earnings news, General Motors posted upbeat Q4 results, but disappointed with its guidance as it warned of lower margins and higher input costs, while Starbucks delivered mixed results due to higher-than-expected inflation, as well as increased COVID-19 and staffing expenses. However, volatility remained as the markets continued to grapple with how aggressive the Fed may be to combat festering inflation pressures, while monetary policy decisions are due out tomorrow from the European Central Bank and the Bank of England. Treasuries were higher, pressuring yields, and the U.S. dollar fell, giving back last week’s rally, while crude oil prices were little changed in choppy action after OPEC and its allies, known as OPEC+, left their production plans unchanged, and gold gained modest ground. Europe finished mixed ahead of tomorrow’s monetary policy decisions in the region, while markets in Asia were higher in subdued volume with some markets in the region remaining closed for the Lunar New Year.
The Dow Jones Industrial Average rose 224 points (0.6%) to 35,629, the S&P 500 Index increased 43 points (0.9%) to 4,589, and the Nasdaq Composite gained 72 points (0.5%) to 14,418. In heavy volume, 4.3 billion shares of NYSE-listed stocks were traded, and 4.5 billion shares changed hands on the Nasdaq. WTI crude oil nudged $0.06 higher to $88.26 per barrel. Elsewhere, the gold spot price advanced $5.10 to $1,801.50 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was down 0.4% at 95.96.
The ADP Employment Change Report showed private sector payrolls dropped by 301,000 jobs in January, well below the Bloomberg forecast calling for a 180,000 gain. December’s rise of 807,000 jobs was revised to a 776,000 increase. Employment in the goods-producing sector declined, while jobs in the service-producing sector fell sharply. ADP said, “The labor market recovery took a step back at the start of 2022 due to the effect of the Omicron variant and its significant, though likely temporary, impact to job growth.”
Today’s ADP data, which does not include government hiring and firing, comes ahead of Friday’s broader January nonfarm payroll report, expected to show headline employment grew by 150,000 jobs and private sector jobs rose by 113,000. The unemployment rate is forecasted to remain at a post-pandemic low of 3.9% and average hourly earnings are projected to rise 0.5% month-over-month (m/m) and be up 5.2% y/y.
The MBA Mortgage Application Index rose 12.0% last week, following the prior week’s decrease of 7.1%. The jump came as an 18.4% surge for the Refinance Index was met with a 4.0% gain for the Purchase Index even as the average 30-year mortgage rate continued to climb, rising 6 basis points (bps) to 3.78%.
Treasuries gained ground, as the yield on the 2-year note was down 1 bp at 1.15%, while the yields on the 10-year note and the 30-year bond fell 2 bps to 1.78% and 2.10%, respectively.
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