Market Update: Tuesday, October 3, 2017

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Market Recap

  • U.S. indexes up as small caps continued to lead; upbeat construction, manufacturing data helped. Dow +0.7%, S&P 500 Index +0.4%, Nasdaq +0.3%, Russell 2000 +1.25%.
  • Materials, healthcare, financials finished ahead of the tape; consumer staples lagged, energy slid on lower crude prices.
  • 10-year Treasuries weakened slightly; +1 basis point (0.01%) to 2.34%.
  • Another day of light NYSE volume; ~86% of 30-day average, breadth positive (1.8:1).
  • Commodities – WTI crude down sharply (-2.2%) to $50.5/bbl., COMEX gold continues pullback (-0.8%) to $1274/oz.

Overnight & This Morning

  • U.S. stocks pause after fresh record close. S&P 500, Nasdaq near flat, Dow up modestly.
  • Major European indexes little changed; though STOXX Europe 600 trading off session lows. IBEX 35 (-0.6%) lagging regional indexes with Catalonian independence referendum in focus.
  • Asia mostly higher; Hang Seng +2.3%, Nikkei +1.1%. Mainland China, Korea exchanges remain closed for holidays.
  • Treasuries continue to inch higher. 10-year note +1 basis point (0.01%) to 2.35%.
  • Commodities – Oil slide continues (-0.1% to $50.53/bbl.) though off worst levels, gold lower (-0.3% to $1272/oz.) as dollar strength continues, copper near flat.

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Macro Notes

  • Rates rise across the yield curve in tough week, capping off a difficult month for fixed income. 2- to 30-year Treasuries rates rose 5 to 8 basis points (0.05–0.08%), while the Bloomberg Barclays Aggregate Index fell 0.10% last week, and fell 0.48% during September. Yield curve steepness was largely unchanged amid the nearly parallel rise in yields across the Treasury curve.
  • Few signs of stress in credit markets. Investment-grade and high-yield bond spreads continued to move lower this week, with high-yield spreads at 3.45% (as measured by the Bloomberg Barclays High Yield Index), and investment-grade spreads (as measured by the Bloomberg Barclays Aggregate Credit Index) hitting 1.0%. Spreads at these levels continue to reinforce the message that credit-sensitive fixed income markets are seeing few signs of stress.
  • The third quarter of 2017 in many ways exhibited characteristics of three different types of markets. Though rates fell slightly in July, volatility was relatively light. Rates fell further in August as markets experienced several flight-to-safety events, while many of the risks that markets were concerned with in August faded, and rates moved higher in September with an assist from the Fed.  We discuss the last quarter in more detail in this week’s Bond Market Perspectives, available later today.

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Click Here for our detailed Weekly Economic Calendar

Tuesday

  • Wards Vehicle Sales (Sept)
  • Italy: Deficit to GDP (Q2)
  • Eurozone: PPI (Aug)
  • Japan: Nikkei Japan Services PMI (Sept)

Wednesday

  • MBA Mortage Applications (Sept 29)
  • ADP Employment Report (Sept)
  • Markit Services PMI (Sept)
  • ISM Non-Manufacturing (Sept)
  • Yellen (Dove)
  • France: Markit France Services PMI (Sept)
  • Eurozone: Markit Eurozone Services PMI
  • UK Markit UK Services PMI (Sept)
  • Eurozone: Retail Sales (Aug)
  • Poland: Base Rate Announcement

Thursday

  • Cahllenger Job Cuts (Sept)
  • Weekly Jobless Claims (Sept 30)
  • Trade Balance (Aug)
  • Factory Orders (Aug)
  • Durable Goods Orders (Aug)
  • Cap Goods Shipments & Orders (Aug)
  • Williams (Dove)
  • Harker (Hawk)
  • George (Hawk)
  • ECB: Account of the Monetary Policy Meeting

Friday

  • Change in Nonfarm, Private, & Manufacturing Payrolls (Sept)
  • Unemployment Rate (Sept)
  • Average Hourly Earnings (Sept)
  • Average Weekly Hours (Sept)
  • Labor Force Participation & Underemployment Rates (Sept)
  • Wholesale Sales & Inventories (Aug)
  • Consumer Credit (Aug)
  • Bostic (Dove)
  • Dudley (Dove)
  • Kaplan (Hawk)
  • Bullard (Dove)
  • Germany: Factory Orders (Aug)
  • Italy: Retail Sales (Aug)
  • Japan: Leading Index (Aug)

Past performance is no guarantee of future results.

The economic forecasts set forth in the presentation may not develop as predicted.

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Commodity-linked investments may be more volatile and less liquid than the underlying instruments or measures, and their value may be affected by the performance of the overall commodities baskets as well as weather, disease, and regulatory developments.

Government bonds and Treasury bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate.

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