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Equities are driving higher, new records in sight, as earnings and data from the services sector are surprisingly positive

US stocks rose early in trading on Wednesday as strong corporate earnings and rosy data on the services sector outweighed a disappointing job report from payroll ADP.

Reports of some progress in Congress toward a new coronavirus aid package also offered the bulls some crunch early in the session.

The Dow Jones Industrial Average DJIA,
+ 1.21%
was about 280 points or 1% higher, close to 27,108, while the S&P 500 SPX,
+ 0.66%
achieved 19 points, 0.6%, to trade close to 3.325. The Nasdaq Composite index COMP,
+ 0.35%
31 points, 0.3%, and was trading near 10.972.

On Tuesday, the Dow picked up 164.07 points, or 0.6%, at 26,828.47; the S&P 500 index increased by 11.90 points, or 0.4%, to 3,306.51, while the Nasdaq Composite Index closed 38.37 points, or 0.4%, at 10,941.17, marking the 30th record of 2020 will be closed.

What drives the market?

The stock market started strong on Wednesday, supported by hopes of progress toward another fiscal lighting package in Congress and better-than-expected corporate earnings.

Late Tuesday reports suggested that after more than a week of near-daily face-to-face meetings, Trump administration officials and congressional democratic leaders are working to reach a coronavirus bill by the end of the week, even if the parties are still far away from the issues.

US Treasury Secretary Steven Mnuchin told reporters on Capitol Hill late Tuesday about the new timeline. “We are pleased to report that while we still have many outstanding issues – I just want to be very clear, we are not about to make a deal – but we have tried to establish a timeline that we will try to reach an overall agreement by the end of this week, if we can, so that the legislation can be adopted next week, ”he said.

Better than expected quarterly results late Tuesday from Dow component and entertainment and amusement park giant Walt Disney Co. DIS,
+ 10.01%,
although it reported a loss of $ 3.5 billion, it also helped make the markets bullish. The company praised 100 million subscribers to its streaming platforms during the pandemic and announced it would release the live-action version of “Mulan” through Disney + for $ 29.99, a new approach to that streaming service.

Separately, Teladoc Health Inc.. TDOC,
-15.64%
and Livongo Health Inc.
LVGO,
-8.27%
said on Wednesday that they have agreed to pool a deal worth $ 18.5 billion to create a company that can meet a spectrum of health needs using virtual care.

Choppy market action over the past few trading sessions is a healthy sign, said Andrew Smith, chief investment strategist at Dallas-based Delos Capital Advisors. “The market is sending a very clear signal that it is trying to change into the cyclically recovering names,” Smith said in an interview.

“The transfer of the baton never happens overnight,” said Smith. “It could take months. We see the catalyst coming from the dollar’s depreciation, which is a huge barometer of the global economic recovery. Days like Tuesday, instead of the market collapsing, there is a split between the names of those at home and the names for recovery. ”

Smith believes that pandemic sweethearts go back and forth between the two regimes Amazon.com Inc.
AMZN,
+ 1.42%
and the cyclical recovery stories will continue for some time. “It is a battle between leading economic indicators and lagging indicators,” he said.

The last monthly reading of the meticulous purchasing managers index of the ISM service sector rose to 58.1 in July, which exceeded expectations and signaled stronger economic growth.

Stock futures made early gains even after payroll provider ADP ADP,
+ 0.35%
said that only 167,000 private sector jobs were created in July, a fraction of the consensus estimate for a profit of 1.88 million jobs, according to Econoday, although June was revised from 4.3 million to 4.3 million. Separately, the trade deficit declined 7.5% to $ 50.7 billion in July.

“In one line: Ouch,” wrote Ian Shepherdson, the chief economist for Pantheon Macroeconomics, after the ADP release. Shepherdson said he finds some comfort in ADP’s blotchy report that foreshadowed labor department figures beforehand. “The error should decrease again in July as the ADP model contains lagged official salary data, so we expect Friday’s report to increase payrolls by about 1 million.” However, that would still mean many millions of jobs for the pandemic.

Federal Reserve’s No. 2 Richard Clarida told CNBC he maintains his previous forecast of an improving economy for the rest of the year. Loretta Mester, president of Cleveland Fed, will also speak at 5 pm during a virtual event

Meanwhile, the US and China said they agreed to hold high-level talks on August 15 to assess Beijing’s compliance with the bilateral trade agreement signed early this year, The Wall Street Journal reported Tuesday. Relations have deteriorated in recent months, with the Trump administration hammering Beijing over the coronavirus outbreak, Hong Kong, and the treatment of Uyghurs in western China. The negotiations between Microsoft Corp.
MSFT,
-0.00%
TikTok, a China-owned entertainment platform, has also created some friction between the two superpowers.

In the area of ​​public health, the global census for confirmed cases of COVID-19 climbed above 18.5 million on Wednesday, according to data collected by Johns Hopkins University, and the death toll rose to 701,027.

Which stocks are in focus?
  • Shares of Humana Inc.. BROMES,
    + 2.29%
    grew 2% after the healthcare company surpassed Q2 earnings and sales that exceeded expectations, while maintaining adjusted earnings prospects.

  • CVS Health Corp.. shares CVS,
    -1.29%
    fell by 0.4% in early trading Wednesday after the drugstore chain broke second-quarter estimates and raised its full-year forecast despite the impact of the coronavirus pandemic on its business

  • Shares of Regeneron Pharmaceuticals Inc.. REGN,
    -1.68%
    fell 1.6% after rising to a record high in premarket trading Wednesday, after the biotechnology company reported second-quarter earnings and revenues that exceeded Wall Street’s expectations, saying it expects clinical studies to remain on track overall in light of the COVID-19 pandemic.

  • Lumber Liquidators Holdings Inc. LL,
    -15.31%
    reported on Wednesday that it came to a surprising second quarter profit as sales fell less than expected as sales trends improved during the quarter as markets reopened after COVID-19 related shutdowns. Shares had fallen sharply by mid-morning.

  • Moderna Inc.
    MRNA,
    -4.15%
    shares fell about 5%, although the company said it was continuing with phase 3 clinical trials for a COVID-19 vaccine.

  • Shares of Wayfair Inc.
    W,
    + 0.51%
    declined by 1.5% on Wednesday, even after the online home and home appliances retailer made big gains in the second quarter, citing “unprecedented demand”.

  • Wendy’s Co. WEN,
    -4.55%
    exceeded analysts’ expectations for the second quarter results, and the fast food chain announced a dividend, but also declined to provide guidance. Shares lost 5%.

How do other markets trade?

The 10-year yield on Treasury bills TMUBMUSD10Y,
0.548%
rose 2.3 basis points to 0.531% after rosy economic data from the eurozone. Bond prices reverse conversions.

Global stock markets crept higher. The Stoxx Europe 600 index SXXP,
+ 0.41%
increased by 0.5% to 365.02 and the FTSE 100 UKX,
+ 0.81%
jumped 0.8%.

In Asia, China’s CSI 300 index 000300,
+ 0.02%
was flat and the Japanese benchmark Nikkei NIK,
-0.26%
Closed 0.3% lower.

The greenback slumped again, with the ICE US Dollar index DXY,
-0.73%
a decrease of 0.8%.

Raw futures CL00,
+ 3.81%
rose 3.7% to $ 43.24 a barrel on the New York Mercantile Exchange, thanks in part to inventory declines. Gold futures for GCQ December 20,
+ 1.92%
pushed 2% higher, to $ 2,041.60 an ounce, looking for a new record.

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