Early Rally Cools, but Stocks Finish Higher…..
U.S. equities finished in the green, albeit well off the best levels of the day, trimming some of last week’s sharp drop. Treasury yields were mixed, and the U.S. dollar lost ground as the markets continue to grapple with uncertainty regarding how much more aggressive monetary policies in the U.S. and Europe will be to try to cool off inflation. Gold traded higher and crude oil prices saw modest losses. The equity front was relatively light, though Pfizer is reportedly in talks to acquire Seagen, while Berkshire Hathaway posted Q4 operating earnings that were down year-over-year (y/y) but it noted $2.6 billion in share buybacks. In economic news, durable goods orders fell on the headline level, though core durable goods orders rose, while pending home sales jumped. Asia was broadly lower, while Europe finished with widespread gains.
The Dow Jones Industrial Average increased 72 points (0.2%) to 32,889, the S&P 500 Index added 12 points (0.3%) to 3,982, and the Nasdaq Composite was up 72 points (0.6%) to 11,467. In moderate volume, 3.8 billion shares of NYSE-listed stocks were traded, and 4.4 billion shares changed hands on the Nasdaq. WTI crude oil lost $0.64 to $75.68 per barrel. Elsewhere, the gold spot price rose $6.30 to $1,823.40 per ounce, and the Dollar Index fell 0.5% to 104.67.
Core durable goods orders rise, pending home sales jump…..
January preliminary durable goods orders fell 4.5% month-over-month (m/m), versus the Bloomberg consensus estimate of a 4.0% decrease, and versus the prior month’s downwardly revised 5.1% jump. Excluding transportation, orders rose 0.7% versus an expected 0.1% rise and compared to the prior month’s negatively revised 0.4% decrease. Finally, non defense capital goods orders excluding aircraft—considered a proxy for capital spending—increased 0.8% m/m, compared to expectations to be unchanged, and compared to December’s negatively revised 0.3% decrease.
Pending home sales rose 8.1% m/m in January, compared to estimates of a 1.0% increase and following December’s negatively revised 1.1% increase. Sales fell 22.4% year-over-year (y/y) but was an improvement from December’s unrevised 34.3% fall. Pending home sales reflect contract signings and are a gauge of the pipeline of existing home sales, as properties typically go under contract a month or two before the contract is closed.
The Dallas Fed Manufacturing Index moved further into contraction territory—a reading below zero—than expected for February. The index dropped to -13.5 from the unrevised -8.4 in January and compared to estimates calling for a decrease to -9.3. The contraction in new orders accelerated, production fell back into contraction territory, inflation components accelerated, and delivery times increased.
Treasury rates were mixed, as the yield on the 2-year note rose 2 basis points (bps) to 4.80%, while the yield on the 10-year note decreased 2 bps to 3.91%, and the 30-year bond rate lost 1 bp to 3.92%.
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