The U.S. equity markets rallied, courtesy of eased geopolitical concerns amid a pause in North Korean missile tests, and as early economic assessments of losses in the aftermath of Hurricane Irma are less than feared. Treasury yields continued to recover from multi-month lows, giving financials a boost, while the US dollar also rebounded from multi-year lows. Crude oil prices were higher, while gold was solidly lower.
The Dow Jones Industrial Average (DJIA) jumped 260 points (1.2%) to 22,057, the S&P 500 Index was 27 points (1.1%) higher at 2,488, and the NASDAQ Composite rallied 72 points (1.1%) to 6,432. In moderate volume, 795 million shares were traded on the NYSE and 1.8 billion shares changed hands on the NASDAQ. WTI crude oil rose $0.59 to $48.07 per barrel and wholesale gasoline lost $0.02 to $1.63 per gallon. Elsewhere, the Bloomberg gold spot price dropped $18.97 to $1,327.62 per ounce, and the dollar index, a comparison of the U.S. dollar to six major world currencies, was 0.6% higher at 91.87.
Insurance stocks got a boost as the markets assessed the impact of Hurricane Harvey in Texas two weeks ago and Hurricane Irma that hammered the Caribbean and made landfall in Florida over the weekend. Early reports are suggesting Irma's costs will likely be less than feared as the storm has been downgraded to a tropical storm. Airlines and travel companies also found support.
Pilgrims Pride Corp (NASDAQ:PPC $28) announced an agreement to acquire poultry and prepared foods supplier Moy Park from Brazil's JBS SA (OTC:JBSAY $5) for about $1.0 billion. PPC said the acquisition is expected to be immediately accretive to earnings per share. PPC finished lower.
Teva Pharmaceutical Industries Ltd. (NYSE:TEVA $19) rallied nearly 20% after the generic drug company named Kare Schultz as its new Chief Executive Officer (CEO), the former CEO of Danish drugmaker H Lundbeck AS (OTC:HLUYY $57). HLUYY was sharply lower.
Treasury yields and the U.S. dollar regaining footing
Treasuries were lower amid a dormant economic calendar, as the yield on the 2-Year note increased 6 basis points (bps) to 1.32%, while the yields on the 10-Year note and the 30-Year bond gained 8 bps to 2.13% and 2.75%, respectively.
Treasury yields and the U.S. dollar rebounded from recent weakness that took the former to levels not seen since November and the latter to well over a two-year low, as risk aversion eases with North Korea holding off on another missile test and the impact of Hurricane Irma appears to less than feared. Downside pressure on bond yields and the greenback has come amid fading expectations of another Fed rate hike this year and as the euro surged in the wake of the European Central Bank's signal that it will likely begin discussions of tapering stimulus measures at its meeting next month
This sets the stage for this week's economic calendar to likely regain some focus, beginning with tomorrow's NFIB Small Business Optimism Index, forecasted to show a slight downtick to a level of 104.8 for August from the 105.2 posted in July, as well as the Job Openings and Labor Turnover Survey (JOLTS) report, with economists expecting the measure of unmet demand for labor to have fallen to 5.8 million jobs available to be filled in July from the 6.2 million registered in June.
Stubbornly low inflation, which has kept Fed rate expectations hamstrung, will also be on display this week, courtesy of the releases of the Consumer Price Index (CPI) and Producer Price Index (PPI) for August. The all-important U.S. consumer will also garner attention as the markets digest the August retail sales report and the preliminary September University of Michigan Consumer Sentiment Index. The docket will also bring industrial production and capacity utilization.
Europe and Asia higher as geopolitical concerns fade and Irma downgraded
European equity markets gained solid ground, with the lack of another missile test by North Korea easing geopolitical concerns, while assessments of the U.S. economic impact of Hurricane Irma were preliminarily reported to be less than estimated as it was downgraded to a tropical storm. Insurance and travel companies got a boost, while sentiment also found some support from upbeat data out of China and Japan.
The euro gave back some of a recent surge to near a three-year high versus the U.S. dollar, while bond yields recovered to also bolster the financial sector. The British pound dipped versus the greenback ahead of this week's Bank of England monetary policy decision. In economic news, Italian industrial production rose more than expected.
Stocks in Asia finished higher as North Korea held off on conducting another missile test, which is easing geopolitical concerns, while early reports of the impact of Hurricane Irma in the U.S. are suggesting the costs will be less than feared. Moreover, Japan posted much stronger-than-expected machine orders, a gauge of capital spending, for July, while China's CPI and PPI figures topped forecasts.
Japanese equities rallied, with the yen giving back some recent gains, while stocks in China and Hong Kong rose, as sentiment also gets a boost from reports that the People's Bank of China intends to ease requirements for financial institutions. Meanwhile, markets in South Korea, Australia and India also advanced.
Tomorrow's international economic calendar will mostly focus on reports out of the U.K., with the island nation set to release CPI, PPI, housing prices and the Retail Price Index.