Markets Mixed Ahead of Key Labor Report…..

U.S. equities finished mixed on the heels of yesterday’s strong advance that was aided by upbeat economic and earnings data, as caution appeared to have set in ahead of tomorrow’s key July labor report. The markets digested today’s monetary policy decision from the Bank of England (BoE), which raised its benchmark interest rate by the most in 27 years and warned of a prolonged recession. Earnings data continued to flood in, with Eli Lilly and Company missing expectations and lowering its guidance, Booking Holdings topping earnings forecasts but offering a cautious outlook, and Paramount Global besting estimates, while Kellogg topped forecasts and offered upbeat guidance. The economic calendar showed jobless claims continued to grind higher ahead of the labor report, while the trade deficit narrowed by a larger amount than expected. Treasuries gained ground, applying downside pressure on yields, and the U.S. dollar fell, giving back yesterday’s gains, while crude oil prices were lower, and gold rallied. Europe was mostly higher, with U.K. markets flat following the BoE’s rate hike and warning, while markets in Asia finished mixed following yesterday’s U.S. rally and amid lingering geopolitical tensions and data.

The Dow Jones Industrial Average lost 86 points (0.3%) to 32,727, the S&P 500 Index shed 3 points (0.1%) to 4,152, while the Nasdaq Composite was up 52 points (0.4%) to 12,721. In moderate volume, 4.2 billion shares of NYSE-listed stocks were traded, and 5.3 billion shares changed hands on the Nasdaq. WTI crude oil decreased $2.12 to $88.54 per barrel. Elsewhere, the gold spot price rallied $32.90 to $1,809.30 per ounce, while the Dollar Index fell 0.8% to 105.72.

Jobless claims continue to tick higher, trade deficit narrows more than expected

Weekly initial jobless claims came in at a level of 260,000 for the week ended July 30, in line with the Bloomberg estimate and up from the prior week’s downwardly-revised 254,000 level. The four-week moving average rose by 6,000 to 254,750, and continuing claims for the week ended July 23 increased by 48,000 to 1,416,000, versus estimates of 1,385,000. The four-week moving average of continuing claims increased by 11,000 to 1,375,250.

The trade balance showed that the June deficit shrunk by a larger amount than expected, decreasing to $79.6 billion, from May’s favorably-revised deficit of $84.9 billion, and compared to forecasts of a decline to $80.0 billion. Exports grew 1.7% month-over-month (m/m), and imports dipped 0.3% m/m.

Treasuries were higher and yields declined, with inversions in multiple areas of the curve 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 basis points (bps) for the second-straight meeting, and the markets appeared to take comments from Chairman Jerome Powell as less hawkish. However, Fedspeak this week has suggested that a Fed pivot is not in the offing and more aggressive rate hikes could continue.

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