Market Update: Tuesday, December 12, 2017

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Market Recap

  • Domestic indexes finished mostly higher ahead of busy macro front. S&P 500 Index +0.3%, Dow +0.2%, Nasdaq +0.5%.
  • Telecommunications led, technology strength continued, energy up on continued WTI crude oil rise; financials, industrials lagged.
  • Positive breadth on NYSE (1.2:1), Nasdaq negative (1.3:1); below-average volume (~93% of 30-day avg.).
  • 10-year Treasury yields higher; +1 basis point (0.01%) to 2.39%.
  • Commodities: Oil +1.2% to $58.02/bbl., COMEX gold -0.3% to $1244/oz., industrial metals mixed.
  • Economic data: Data lull ahead of two-day Federal Reserve (Fed) meeting; tax reform still in focus though no recent newsworthy developments.

Overnight & This Morning

  • U.S. indexes open slightly higher as markets await central bank news.
  • European indexes broadly higher midday; follows positive U.K. inflation data. STOXX Europe 600 +0.4%, DAX +0.2%, CAC 40 +0.5%.
  • Asian markets lower; soft Chinese inflation data weighed, though money supply and lending data better than expected. Nikkei -0.3%, Hang Seng -0.6%, Shanghai Composite -1.3%.
  • Treasuries holding steady. 10-yr. note yielding 2.39%.
  • Commodities: Oil pushing higher (+0.6% to $58.35/bbl.), gold flat at $1244/oz., industrial metals remain mixed.
  • Economic data: Domestic Producer Price Index (PPI) numbers came in slightly above expectations (+0.4% month over month vs. expectations of +0.3%).

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Macro Notes

  • Busy week for central banks. The Fed’s two-day meeting begins today with an interest rate decision set to be made tomorrow at 2 p.m. We expect a rate hike, though markets have largely priced this in, so the economic projections, dot plots, and post-meeting press conference may be the bigger focus for investors. While, the European Central Bank (ECB) and Bank of England will also offer statements at the end of their respective monetary policy meetings on Thursday, December 14, we don’t expect any new policy announcements. However, the ECB will release updated economic projections, which could have an impact on markets. We discuss these meetings in more detail in this week’s Bond Market Perspectives, due out later today.
  • 10-year Treasury remains in recent range…again. The 10-year Treasury yield has traded within a range of just under 0.1% over the past 30 trading days. The last time we’ve seen such a tight range was in late February 1974. The range was definitely more impressive at that point given that the 10-year was yielding around 7%, but the range we are seeing today is historically tight nonetheless.
  • Surprise, Surprise, Surprise! Economic surprise indexes from Bloomberg and Citigroup both hit multiyear highs in November, confirming a broad picture of growing economic momentum. In this week’s Weekly Economic Commentary, we look at what drove the numbers and what it might mean for the economy as we head into 2018.

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Click Here for our detailed Weekly Economic Calendar

Tuesday

  • National Federation of Independent Business Small Business Optimism (Nov)
  • PPI (Nov)
  • Monthly Budget Statement (Nov)
  • UK: CPI & PPI (Nov)
  • Germany: ZEW Survey (Dec)
  • Eurozone: ZEW Survey (Dec)
  • Russia: GDP (Q3)
  • BOJ: Outright Bond Purchase
  • Japan: Core Machine Orders (Oct)

Wednesday

  • MBA Mortgage Applications (Dec 8)
  • CPI (Nov)
  • Core CPI (Nov)
  • Real Avg Weekly & Hourly Earnings (Nov)
  • FOMC Rate Decision
  • Yellen (Dove)
  • Germany: CPI (Nov)
  • Germany: Wholesale Price Index (Nov)
  • Italy: Industrial Production (Oct)
  • UK: Jobless Claims Change (Nov)
  • Eurozone: Industrial Production (Oct)
  • Eurozone: Employment (Q3)
  • Japan: Nikkei Japan Mfg PMI (Dec)
  • Japan: Industrial Production & Capacity Utilization (Oct)
  • China: Retail Sales (Nov)
  • China: Industrial Production (Nov)

Thursday

  • Weekly Jobless Claims (Dec 9)
  • Import & Export Price Indexes (Nov)
  • Retail Sales (Nov)
  • Markit Mfg & Svs PMI (Dec)
  • Business Inventories (Oct)
  • France: CPI (Nov)
  • France: Markit France Mfg PMI (Dec)
  • Germany: Markit Germany Mfg & Svs PMI (Dec)
  • Italy: CPI (Nov)
  • Eurozone: Markit Eurozone Mfg & Svs PMI (Dec)
  • UK: Retail Sales (Nov)
  • BOE: Bank Rate
  • ECB: Main Refinancing Rate
  • ECB: Draghi
  • Bank of Canada: Poloz
  • Bank of Mexico: Overnight Rate
  • Japan: Tankan Survey (Q4)
  • China: Foreign Direct Investment (Nov)

Friday

  • Empire Manufacturing Index (Dec)
  • Industrial Production & Capacity Utilization (Nov)
  • Manufacturing Production (Nov)
  • Total Net Treasury Int’l Capital Flows (Oct)
  • Eurozone: Trade Balance (Oct)
  • ECB: Nowotny
  • Bank of Russia: Key Rate

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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