Stocks End Higher Amid Mostly Upbeat Earnings and Economic Data…..
U.S. stocks closed higher amid a host of economic data that came in above forecasts. Starbucks Corporation and PayPal both topped profit projections, while Advanced Micro Devices’ results were overshadowed by its Q3 guidance. In other equity news, shares of Airbnb fell after missing bookings expectations and issuing disappointing Q3 bookings guidance. The ISM Services Index unexpectedly improved as new orders gained solid ground and S&P Global’s Services PMI was surprisingly revised higher but remained in contraction territory. Elsewhere, factory orders rose more than expected and mortgage applications snapped a weekly losing streak as interest rates fell. Treasuries saw pressure as yields rose, and the U.S. dollar turned higher. Crude oil prices declined even as OPEC+ modestly increased its production target, and gold traded to the downside. Asia finished mixed and Europe advanced as the markets awaited tomorrow’s Bank of England’s policy decision.
The Dow Jones Industrial Average increased 416 points (1.3%) to 32,813, the S&P 500 Index gained 64 points (1.6%) to 4,155, and the Nasdaq Composite went up 319 points (2.6%) to 12,668. In moderate volume, 4.3 billion shares of NYSE-listed stocks were traded, and 5.5 billion shares changed hands on the Nasdaq. WTI crude oil decreased $3.76 to $90.66 per barrel. Elsewhere, the gold spot price went down $7.00 to $1,782.70 per ounce, while the Dollar Index increased 0.1% to 106.36.
Services sector activity better than expected, mortgage applications snap losing streak
The July Institute for Supply Management (ISM) Services Index showed expansion in the key services sector unexpectedly accelerated. The index rose to 56.7, from the 55.3 in June, and versus the Bloomberg consensus estimate of a decrease to 53.5. A reading above 50 denotes expansion in activity. The acceleration came as business activity grew, along with new orders, and employment month-over-month (m/m). Meanwhile, new export orders increased, while inventories declined and continued to contract, and prices paid decreased solidly from the prior month but remained severely elevated.
The ISM said, “The slight increase in services sector growth was due to an increase in business activity and new orders, though availability issues with overland trucking, a restricted labor pool, various material shortages and inflation continue to be impediments for the services sector.”
The final July S&P Global Services PMI Index was revised higher to 47.3 from the preliminary 47.0 level, where it was forecasted to remain, but remained in contraction territory (a reading below 50), and was below June’s reading of 52.7.
Factory orders increased 2.0% m/m in June, above estimates of a 1.2% rise, with the prior month’s 1.6% gain being revised higher to a 1.8% increase. Durable goods orders—preliminarily reported last week—were revised favorably to a 2.0% advance for June, and excluding transportation, orders were adjusted higher to a 0.4% gain. Finally, nondefense capital goods orders excluding aircraft—considered a proxy for capital spending—was favorably-revised to a 0.7% increase.
The MBA Mortgage Application Index increased 1.2% last week, following the prior week’s decline of 1.8%. The index snapped a string of four-straight weekly declines as a 1.5% gain for the Refinance Index was met with a 1.0% increase for the Purchase Index. The rebound came as the average 30-year mortgage rate fell 31 basis points (bps) to 5.43%, but is up 246 bps versus a year ago.
Treasuries were higher and yields fell, with the inversion of the 2-year and 10-year notes remaining intact. The markets continue to grapple with persisting inflation pressures that prompted last week’s Fed monetary policy decision to raise its benchmark interest rate by 75 bps for the second-straight meeting, and the markets appeared to take comments from Chairman Jerome Powell as less hawkish.
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