U.S. stocks rose Monday to kick off the first trading day of August amid wrangling in Washington over another round of coronavirus stimulus, while investors also eyed data showing a stronger-than-expected improvement in factory activity.
How are equity benchmarks performing?
The Dow Jones Industrial Average DJIA, +0.83% climbed 266 points, or 1%, to 26,694. The S&P 500 SPX, +0.75% rose 28 points, or 0.9%, to 3,299. The Nasdaq Composite COMP, +1.47% gained 156 points, or 1.5%, to 10,901, setting a new intraday record at 10,905.40.
On Friday, the Dow put in a weekly loss of 0.2%, while the S&P 500 gained 1.7% and the Nasdaq Composite Index surged 3.7% over the period. In July, the indexes booked a fourth straight monthly gain, with the Dow gaining 2.4%, the S&P 500 advancing 5.5% and the Nasdaq rallying 6.8% for the month.
What’s driving the market?
In economic data, the Institute for Supply Management reported that its manufacturing gauge rose to a reading of 54.2, while new orders jumped to 61.5. MarketWatch-polled analysts had forecast the purchasing managers index to rise to 53.6, from 52.6 in June. Any reading above indicates an expansion in factory activity.
“The ongoing uncertainty around the virus and state of the economy still raised questions on the sustainability of the rebound in manufacturing. The strong July report provides further confirmation of improvement in recent months,” said Jim Baird, chief investment officer at Plante Moran Financial Advisors.
A raft of stronger-than-expected manufacturing purchasing managers indexes in Europe and in China pointed to signs of a steadying global economy.
Market participants were also focused on the fact that there are no signs of a stimulus package between Democrats and Republicans after negotiations over the weekend failed to yield a replacement for a $600-a-week boost to unemployment benefits that expired Friday.
House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin revealed clear fault lines in negotiations between the parties during Sunday talk shows. Pelosi said that “we’ll be close to an agreement when we have…an agreement,” speaking to ABC’s Martha Raddatz on “This Week.”
At issue for Democrats and Republicans is the amount of unemployment assistance for Americans. The White House has come out in favor of reducing the federal assistance to $200 a week, Democrats have called for keeping it at $600 a week. However, the parties appear to both support a fresh round of stimulus checks of $1,200 for workers.
The fight for aid for out-of-work Americans comes ahead of Friday’s July report on the labor market that will be pored over to determine the impact of the deadly pathogen on employment as cases of the infection have steadily risen in a number of states.
Indeed, coronavirus infections in the U.S. reached a record in July, with more than 1.9 million new cases. The U.S. has nearly 4.7 million confirmed COVID-19 cases and about 155,000 deaths, while the global tally for infections stands at more than 18 million and almost 690,000 deaths, according to data compiled by Johns Hopkins University.
Meanwhile, investors may focus on developments between Microsoft Corp. MSFT, +4.45% and video-sharing app TikTok, owned by a Chinese company, ByteDance. Microsoft confirmed talks to buy the American unit of the company and Microsoft CEO Satya Nadella said he spoke with President Donald Trump. Trump on Friday had signaled that he was considering a ban of the popular app.
Secretary of State Mike Pompeo over the weekend said that the White House may take action against other Chinese software companies, highlighting elevated tensions between Beijing and Washington.
On the Federal Reserve front, St. Louis Fed President James Bullard is expected to speak at 12:30 p.m., while Charles Evans, Chicago Fed president, is slated to speak at 2 p.m.
Dallas Fed President Robert Kaplan said expected economic rebound this quarter “is more muted” than expected and, as a result, the unemployment rate this year will likely be higher than previously thought.
Which stocks are in focus?
- Shares of Clorox Co. CLX, -2.23% fell 2% after the maker of cleaning and household products reported a fiscal fourth-quarter profit and revenue that beat expectations, as it benefited from demand for cleaning products as a result of the COVID-19 pandemic, while providing an in-line outlook.
- Microsoft MSFT, +4.45% shares rallied 4.2% after confirming on Sunday that it is holding talks with China-based ByteDance to buy the U.S. operations of its TikTok unit.
- Marathon Petroleum Corp. MPC, -1.15%, fresh from the sale of its gas stations to the owners of the 7-Eleven convenience store chain for $21 billion in the largest U.S. energy deal of the year, posted second-quarter earnings Monday, showing a smaller-than-expected adjusted loss but revenue that lagged estimates. Marathon shares fell 1.4%.
- Shares of residential and commercial security provider ADT Inc. ADT, +65.21% soared 66% Monday, after the company announced a new venture with Alphabet Inc.’s GOOG, -0.83% GOOGL, -0.73% Google to create the next generation of smart home security offerings.
- Apple Inc. AAPL, +3.19% rose 2.9% after it purchased an online payments startup that could turn the iPhone into a payment terminal, much as Square SQ, +4.51% does, according to a report. Apple has bought Montreal’s Mobeewave for about $100 million, according to Bloomberg News.
- McKesson Corp. MCK, +5.33% Shares of climbed 5% after the drug distributor and health care services company reported fiscal first-quarter profit and revenue that beat expectations.
- Tyson Foods Inc. TSN, +1.41% rose 1.6% even after the meat producer’s earnings topped Wall Street forecasts.
How are other markets trading?
The 10-year Treasury note yield TMUBMUSD10Y, 0.562% was up 2 basis points to 0.56%. Bond prices move inversely to yields.
Global equity markets marched higher on Monday. The Stoxx Europe 600 index SXXP, +2.05% rose 2%, while China’s CSI 300 index 000300, +1.62% gained 1.6%. Japan’s benchmark Nikkei index NIK, +2.23% climbed 2.2%.
The greenback reversed some of its decline this year, with the ICE U.S. Dollar index DXY, +0.29% jumping 0.4%.
Crude futures CL00, +1.58% shed their early losses to move up 2%, or 0.8%, to $41.07 a barrel, on the New York Mercantile Exchange. Gold futures GCQ20, +0.06% gained $5.60, or 0.3%, to $1,968.40 an ounce.
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