Market Update: Thursday, September 21, 2017

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Yesterday’s Market Activity

  • U.S. equities mixed yesterday. Overall market was little changed as Fed announcement fell in line with general expectations. Dow +0.2%, S&P 500 Index +0.1%, Nasdaq -0.1%.
  • Energy sector led, aided by continued rise in WTI crude oil prices. Banks drove financials; healthcare outperformed as well. Consumer staples lagged.
  • Above average NYSE exchange volume (100.79%). Breadth was positive (1.3:1).
  • U.S. dollar strengthened; 10-year Treasury yield +2 basis points (0.02%) to 2.26%.
  • Commodities COMEX gold (-0.5%) to $1304/oz., WTI crude (+1.64%) to ~$50.3/bbl. Industrial metals rose.
  • FOMC held rates steady; balance sheet run-off scheduled to commence next month

Overnight & This Morning

  • Asian markets little changed. Nikkei +0.2%, Hang Seng -0.1%, Shanghai Composite -0.2%.
  • Stocks in Europe mostly higher on little news. STOXX Europe 600 +0.2%, though U.K’s FTSE 100 is holding flat.
  • Crude oil (-0.9%) above $50/bbl. ahead of Friday’s OPEC meeting.
  • Industrial, precious metals sharply lower. Gold (-1.8%) to $1293/oz., copper -1.0%.
  • U.S. stocks opened flat. Treasury yields similarly unchanged as investors continue to digest yesterday’s Fed statement.
  • Today’s economic calendar includes initial jobless claims and September Philly Fed Index.

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  • The Federal Reserve (Fed) left rates unchanged as expected; however, a December hike is still likely. Investors also received much-anticipated details on the Fed’s plan to unwind its balance sheet, which is slated to start next month. We believe the initial impact to markets will be limited as market participants have had plenty of time to price in this well telegraphed move. Get more insights and takeaways from yesterday’s Fed meeting in our most recent blog post.

Macro Notes

  • Bank of Japan (BOJ) leaves policy unchanged. As expected, the BOJ maintained the status quo following its monetary policy meeting. However, a new board member dissented from the otherwise unanimous vote, suggesting additional asset purchases would be needed for the BOJ to achieve its 2% inflation target. In contrast, other members foresee either no need to change the current terms of the bank’s asset purchase program or a potential need to decrease asset purchases, though not any time soon. Liquidity in the country’s government bond market is another source of debate given that the central bank holds a ~40% share, though the board assured markets that there were no issues.
  • Existing home sales missed expectations in August. On the economic front we saw existing home sales, which came in at 5.35 million, below consensus of 5.48 million and down 1.7% month over month. Year over year they were up 0.2%. Part of the miss was likely due to Hurricane Harvey, with the South down the most at -5.7% month over month.
  • Crude oil inventories show a build, while RBOB Gasoline shows a drawdown for the week of September 15. The EIA‘s Petroleum Status Report also showed a build in crude oil inventories, but this report was also likely impacted by Hurricane Harvey, which caused the shutdown of major refineries on the gulf coast. However, any weakness that this report may have caused was offset by more talk of supply cuts from major OPEC and non-OPEC countries, which triggered oil to move higher and close just above $50/bbl. for the first time since the end of July.

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Click Here for our detailed Weekly Economic Calendar

 Thursday

Friday

  • Markit US Manufacturing & Services PMI (Sept)
  • Williams (Dove)
  • George (Dove)
  • Kaplan (Hawk)
  • France: GDP (Q2)
  • France: Markit France
  • France: Manufacturing & Services PMI (Sept)
  • Germany: Markit Germany
  • Germany: Manufacturing & Services PMI (Sept)
  • Eurozone: Markit Eurozone
  • Canada: CPI (Aug)

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