Stocks Rebound Somewhat in Tempered Session…..

U.S. equities finished higher following a recent draw-down that was amplified by Friday’s sharp selloff. However, the gains remained in check as the markets await this week’s monetary policy decision from the Fed, which is expected to be aggressive with its rate hikes. Moreover, global sentiment continues to be hampered by the ongoing war in Ukraine, the recent spike in interest rates, the rallying U.S. dollar, and slowing economic activity in China. The economic calendar showed manufacturing growth unexpectedly slowed, and that construction spending fell short of forecasts. Meanwhile, earnings season continued to roll on, with Moody’s Corporation missing profit projections amid the persistent headwinds. Treasuries were lower to lift yields, and the U.S. dollar gained ground, while crude oil prices were slightly higher, but gold tumbled. Europe finished lower amid the global uneasiness, while Asia also saw pressure following some mixed business activity reports that was highlighted by softer-than-expected Chinese output. Markets in China, Hong Kong, and the U.K. were closed for holidays.

The Dow Jones Industrial Average rose 84 points (0.3%) to 33,062, the S&P 500 Index increased 23 points (0.6%) to 4,155, and the Nasdaq Composite advanced 201 points (1.6%) to 12,536. In heavy volume, 5.1 billion shares of NYSE-listed stocks were traded, and 4.8 billion shares changed hands on the Nasdaq. WTI crude oil gained $0.48 to $105.17 per barrel. Elsewhere, the gold spot price traded $48.80 lower to $1,862.90 per ounce, and the Dollar Index was 0.6% higher at 103.60.

The April Institute for Supply Management (ISM) Manufacturing Index (chart) showed manufacturing growth unexpectedly deteriorated but continued to show expansion. The index declined to 55.4 from March’s 57.1 level, and versus the consensus Bloomberg estimate of an increase to 57.6. A reading above 50 denotes expansion in activity. The softer-than-expected report came as both new orders and production fell but continued to grow, along with inventories. Employment growth decelerated, and supplier delivery times increased. Inflation pressures cooled but remained elevated, with prices paid declining to 84.6.

The ISM said, “The U.S. manufacturing sector remains in a demand-driven, supply chain-constrained environment. In April, progress slowed in solving labor shortage problems at all tiers of the supply chain. Panelists reported higher rates of quits compared to previous months, with fewer panelists reporting improvement in meeting head-count targets. April saw a slight easing of prices expansion, but instability in global energy markets continues.”

The final April S&P Global U.S. Manufacturing PMI Index was downwardly-revised to 59.2, below estimates calling for an unrevised 59.7 level. The index was above March’s reading of 58.8. A reading above 50 denotes expansion.

S&P Global said the report signaled a sharp improvement in operating conditions across the U.S. manufacturing sector. Overall growth was supported by faster increases in output and new orders, as domestic and foreign client demand ticked higher. Although backlogs of work rose at a sharper pace—largely due to greater new sales—firms noted that fewer supply bottlenecks allowed production to expand at a faster rate. Moreover, supplier delivery times deteriorated to the smallest extent since January 2021. Nonetheless, costs continued to soar, as the rate of input price inflation quickened to a marked pace.

Construction spending increased 0.1% month-over-month (m/m) in March, versus projections of a 0.8% gain and down from February’s unrevised 0.5% rise. Residential spending grew 1.0%, but non-residential spending declined 0.8%.

Treasuries were lower with yields gaining ground as the markets grapple with a host of headwinds and expectations that the Fed is set to get aggressive with monetary policy tightening. Fed Chairman Jerome Powell has suggested a rate hike of 50 basis points (bps) is on the table for this week’s monetary policy decision.

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