U.S. equities finished mixed and near the unchanged mark, as a rise in financials, despite a decline in Treasury yields, were offset by continued volatility in technology issues that hamstrung the NASDAQ. Crude oil prices moved higher and gold was lower, while the U.S. dollar was unchanged. On the economic front, durable goods orders missed forecasts, while some regional manufacturing activity remained in expansion territory.
The Dow Jones Industrial Average (DJIA) rose 15 points (0.1%) to 21,410, the S&P 500 Index was nearly a point higher to 2,439, while the NASDAQ Composite lost 18 points (0.3%) to 6,247. In moderate volume, 795 million shares were traded on the NYSE and 2.1 billion shares changed hands on the NASDAQ. WTI crude oil gained $0.37 to $43.38 per barrel and wholesale gasoline was $0.01 higher at $1.43 per gallon. Elsewhere, the Bloomberg gold spot price decreased $12.77 to $1,243.94 per ounce, and the dollar index, a comparison of the U.S. dollar to six major world currencies, was flat at 97.43.
Nestle SA (SIX:NESN $88) got a boost to help the European markets move higher amid the disclosure that hedge fund Third Point, ran by activist investor Dan Loeb, has accumulated a $3.5 billion stake in the company. Third Point is encouraging Nestle to sell its stake in cosmetics maker L’Oreal Co (OTC:LRLCY $44), increase leverage for share buybacks and adopt a formal profitability target, among other suggestions, per Bloomberg.
Avis Budget Group Inc (NASDAQ:CAR $28) jumped on the announcement that it has entered into an agreement regarding self-driving car fleet management with Google parent Alphabet (NASDAQ:GOOGL) Inc. (GOOGL $972).
Durable goods orders miss
May preliminary durable goods orders dropped 1.1% month-over-month (m/m), compared to the Bloomberg estimate of a 0.6% decline, and April's 0.8% decrease was revised to a 0.9% fall. Ex-transportation, orders were 0.1% higher m/m, compared to forecasts of a 0.4% gain and versus April's unrevised 0.5% decline. Orders for non-defense capital goods excluding aircraft, considered a proxy for business spending, decreased 0.2%, versus projections of a 0.4% increase, and the upwardly revised 0.2% rise posted in the month prior.
Investors may be questioning the durability of the U.S. bull market, but we believe strong earnings growth and a solid economy will continue to support further gains, but more volatility should be expected. Economic confusion may be contributing to investor skepticism, with the labor market continuing to tighten and housing in good shape, but inflation has been in retreat along with commodity prices. Meanwhile, for the first time in a while, the Fed sounded slightly more hawkish at its June meeting.
The Dallas Fed Manufacturing Activity Index declined more than expected but remained at a level depicting expansion (a reading above zero). The index decreased to 15.0 in June, from 17.2 in May, and compared to the expected decline to 16.0.
The political front remains in focus amid this week's Senate healthcare bill battle, while Capitol Hill continues to debate the debt ceiling and the markets are looking for any developments on tax and regulatory reforms.
Treasuries finished higher, as the yield on the 2-Year note fell 2 basis points (bps) to 1.33%, the yield on the 10-Year note dipped 1 bp to 2.13% and the 30-Year bond rate is decreased 2 bps to 2.70%. Bond yields remain depressed amid the economic confusion and political uncertainty.
Tomorrow's economic calendar will begin with the S&P/Case-Schiller Home Price Index, forecasted to show the 20-city composite rose 5.9% year-over-year and 0.45% on a seasonally-adjusted basis month-over-month in April, as well as the Consumer Confidence Index, with economists expecting a slight downtick to a level of 116.0 for June from the 117.9 posted in May, and the Richmond Fed Manufacturing Index will round out the day.
Europe higher on eased Italian bank concerns, Asia mostly higher as oil stabilizes
European equities finished broadly higher, with financials getting a boost from news that Italy has moved to bailout two ailing regional banks, while a read on German business confidence unexpectedly improved for June. Oil and gas issues gave up a modest advance as crude oil prices were choppy in the wake of a recent tumble.
The euro and British pound ticked higher versus the U.S. dollar, while bond yields in the region finished mixed. The markets shrugged off festering political turmoil overseas, including upcoming elections in Italy and Germany later this year and as the U.K. preps for intensified Brexit negotiations.
Stocks in Asia finished mostly higher to begin the week, with crude oil prices stabilizing after last week's drop, while Chinese markets led the way amid optimism about MSCI inclusion of mainland shares and speculation that state-backed funds were helping support the markets, per Bloomberg. Both mainland Chinese stocks and those traded in Hong Kong advanced.
Japanese equities ticked higher, with the yen nudging lower, while securities in Australia and South Korea finished higher. Markets in India were closed for a holiday.
Tomorrow's international economic calendar will include consumer sentiment from South Korea as well as business and consumer confidence from Italy.