Markets Post Gains, but Volatility Persists…..

U.S. equities finished higher in another choppy session on the heels of Monday’s rally, as volatility continued to plague the markets. Conviction remained in check by the myriad headwinds, mainly persistent inflation pressures that is forcing the Fed to ramp-up its monetary policy tightening campaign, and concerns about slowing economic growth that is fostering a pick-up in recession chatter. Dow member Apple was in focus after a report that the lockdowns in China have delayed at least one of its new iPhones. Earnings reports continued to pour in, with Dick’s Sporting Goods the latest retailer to see a jump in inventories and lower full-year guidance, while Toll Brothers topped quarterly expectations but lowered its full-year delivery outlook. In economic news, durable goods orders rose by a smaller amount than expected and mortgage applications declined for a second week, while the afternoon release of the minutes from the Fed’s early May monetary policy meeting reiterated the Committee’s resolve in its aggressiveness in upcoming meetings. Treasuries were nearly flat, the U.S. dollar gained ground, and crude oil prices were modestly higher, while gold finished to the downside. Europe finished higher but trading was choppy amid global concerns about economic growth, and Asia was mixed though China rebounded.

The Dow Jones Industrial Average rose 192 points (0.6%) to 32,120, the S&P 500 Index gained 37 points (1.0%) to 3,979, and the Nasdaq Composite increased 170 points (1.5%) to 11,435. In moderate volume, 4.8 billion shares of NYSE-listed stocks were traded, and 4.4 billion shares changed hands on the Nasdaq. WTI crude oil advanced $0.56 to $110.33 per barrel. Elsewhere, the gold spot price was down $12.50 to $1,852.90 per ounce, and the Dollar Index added 0.3% at 102.13.

The S&P 500 has remained choppy this week after registering a seventh weekly drop last week as investors continue to grapple with the ultimate implications of persisting inflation pressures and expectations of an aggressive Fed monetary policy tightening campaign.

Durable goods orders softer than expected, mortgage applications decline even as rates dip

April preliminary durable goods orders (chart) rose 0.4% month-over-month (m/m), compared to the Bloomberg consensus estimate of a 0.6% increase and versus March’s downwardly-revised 0.6% increase. Ex-transportation, orders were up 0.3% m/m, south of forecasts calling for a 0.6% advance and compared to March’s negatively-adjusted 1.1% rise. Orders for non-defense capital goods excluding aircraft, considered a proxy for business spending, were higher by 0.3%, compared to projections of a 0.5% rise, and versus the prior month’s downwardly-adjusted 1.1% gain.

The MBA Mortgage Application Index declined 1.2% last week, following the prior week’s drop of 11.0%. The index was down for a second week as a 3.9% decline in the Refinance Index more than offset a 0.2% gain for the Purchase Index. The decline came even as the average 30-year mortgage rate decreased 3 basis points (bps) to 5.46%, but is up 228 bps versus a year ago.

Treasuries were little changed, and yields have been choppy as of late as markets anticipate tighter Fed monetary policy amid the backdrop of persistent inflation and signs of slowing economic growth. In afternoon action, the Central Bank released the minutes from its last monetary policy meeting, in which it increased rates by 50 bps—the first increase of that magnitude in over 20 years. The report showed that not only did policymakers see the need to up the target for its benchmark interest by the 50 bps in May, but that such a move would likely be necessary at the next several meetings. The minutes said, “Most participants judged that 50 basis point increases in the target range would likely be appropriate at the next couple of meetings,” adding, “a restrictive stance of policy may well become appropriate depending on the evolving economic outlook and the risks to the outlook.”

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