Nasdaq Kicks Off August With Another Record Close

What’s happening: US stocks kicked off the first trading day of August on a strong note, with the Nasdaq 100 surging to an all-time high on Monday.

What happened: Although there has been no progress in the talks for another round of covid-19 stimulus relief, investors took solace from the upbeat manufacturing PMI data announced on Monday.

After surging 6.8% in July, the Nasdaq 100 continued its positive momentum into the new month, to close at another record high, with all eyes now on the next major psychological barrier of 11,000.

Why it matters: The ISM (Institute for Supply Management) reported that its manufacturing index had climbed to 54.2 in July, with new orders surging to 61.5. This was better than the consensus expectations of 53.6 and June’s reading of 52.6.

Upbeat manufacturing PMIs (purchasing managers indexes) from Europe and China also drove investor optimism.

For the moment, investors chose to ignore the stalemate between the Democrats and Republicans during their weekend negotiations, which failed to launch a replacement of the jobless benefits package that expired on Friday.

Meanwhile, covid-19 cases in the US climbed to a new record, after adding over 1.9 million new infections in July. The US now has confirmed around 4.7 million cases, with approximately 155,000 deaths.

Investors focused on positive news related to Eli Lilly’s covid-19 vaccine candidate, which commenced Phase III trials for coronavirus antibody treatment.

Shares of Microsoft jumped more than 5% on Monday after the company confirmed talks to acquire the US unit of the Chinese video-sharing app TikTok. The talks come on the heels of Trump signaling to impose a ban on the app last week.

ADT Inc’s stock spiked 56% on Monday after the company disclosed a new venture with Google. Apple’s shares gained 2.5% following news of the iPhone maker’s purchase of an online payments startup Mobeewave for around $100 million.

McKesson Corp’s stock climbed 6% after the drug distributor posted better-than-expected fiscal first-quarter results.

After losing 0.2% last week, the Dow Jones index jumped 236.08 points to settle at 26,664.40 on Monday, while the S&P 500 gained 0.7% to close at 3,294.61, reaching its highest level since February 21.

The Nasdaq 100 jumped 1.5% to finish at 10,902.80 on Monday, following a 3.7% surge last week. The tech-laden index hit a new intraday record of 10,905.40 during the trading day.

What to watch: Investors await another round of earnings releases from major companies along with economic reports on business conditions and factory orders. Analysts expect factory orders to rise 5% in June, following an 8% increase in May.

Markets will keep a close eye on any developments related to the new stimulus bill. The daily covid-19 numbers will also remain in focus.

Crude oil will be in focus today, ahead of the API’s (American Petroleum Institute) report on crude stockpiles.

Context: Oil futures closed higher on Monday following upbeat data on manufacturing activity.

Details: Oil added to gains on Monday after the ISM’s manufacturing index surged to its highest level in fifteen months and exceeded market expectations.

However, some analysts expect the upside to remain limited, as the OPEC (Organization of the Petroleum Exporting Countries) and its allies are all set to relax output restrictions from August. The production cuts are being eased from 9.7 million bpd (barrels a day) to 7.7 million bpd from this month till the end of the year.

On the other hand, covid-19 infections continue to rise globally. While US witnessed new daily cases gaining in 13 states last week, Europe also reported a second wave of infections.

WTI (West Texas Intermediate) crude for September delivery gained 1.8% to close at $41.01 per barrel on the NYMEX (New York Mercantile Exchange). October Brent crude added 1.5% to settle at $44.15 per barrel on ICE Futures Europe. US crude gained about 2.6% in July, with Brent rising more than 5% in the month.

Natural gas rose sharply on Monday, with expectations of an increase in demand as warmer weather is projected in the coming days. September natural gas rose 16.8% to settle at $2.1010 per million British thermal units, recording its biggest single-day percentage rally since November 2018.

What to watch: Investors await the API’s report on crude oil stockpiles in the US, which declined by 6.829 million barrels in the week ending July 24. Investors will also continue to keep a close eye on the daily covid-19 figures.

Other Markets: European indices were trading lower at 8:30am GMT, with the FTSE 100, French 40 and Dax 30 index down by 0.4%, 0.3% and 0.7%, respectively.

Brazil's industrial production, Canada’s manufacturing PMI, Argentina’s tax revenue as well as the US Redbook index and IBD/TIPP economic optimism index.