Market Update: Wednesday, January 24, 2018

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Market Recap

  • Major U.S. indexes posted strong gains, maintaining momentum on mostly positive earnings results, business fundamentals; Dow flat, S&P 500 Index +0.2%, Nasdaq +0.7%.
  • REITs, utilities led sectors, making up some recently lost ground. Telecommunications, healthcare lagged.
  • Positive market breadth (NYSE 1.6:1, Nasdaq 1.3:1), trading volume even with its 30-day avg.
  • Treasury yields fell; 10-yr. yield -3 basis points (-0.03%) to 2.62%.
  • Commodities: WTI crude oil made a strong advance (+1.9% to $64.75/bbl.), COMEX gold firmed +0.7% to $1340/oz., industrial metals mixed.
  • Economic data: Japanese merchandise trade surplus widened less than anticipated (¥359 billion vs. ¥584 billion).

Overnight & This Morning

  • Stocks continuing win streak. U.S. equities opened higher, helped by comments from Treasury Secretary Mnuchin regarding the trade benefits of a weaker dollar.
  • European stocks near flat midday; markets continue to watch for news from Davos with Merkel, Macron scheduled to speak today. STOXX Europe 600 flat, DAX flat, CAC 40 -0.1%.
  • Asian markets closed mixed; Japan was the notable underperformer after lackluster trade report. Shanghai Composite +0.4%, Hang Seng flat, Nikkei 225 -0.8%.
  • Treasuries giving back yesterday’s gains; 10-yr. yield +4 basis points (+0.04%) to 2.66%.
  • Commodities: Oil continues higher (+0.4% to $64.70/bbl.), gold +1.1% to 1351/oz., industrial metals mixed.
  • Economic data: Eurozone Purchasing Managers’ Index composite figures topped estimates (58.6 vs. 57.9), show growth at 12-yr. high.

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 Macro Notes

  • Senate confirms Powell. In a move that was largely expected, the Senate confirmed Jerome (Jay) Powell as the next chair of the Federal Reserve (Fed). He will officially take the post on February 3, following the Fed’s upcoming January 30-31 meeting. Powell is expected to follow a monetary policy blueprint similar to the one outgoing Chair Janet Yellen followed–with balance sheet normalization continuing as previously scheduled and a gradual path of data-dependent rate hikes. Powell is viewed though as more receptive to the easing of regulatory burdens than Yellen. With Powell’s confirmation, and Yellen’s upcoming exit, President Trump will have three remaining posts to fill on the Fed’s seven-member Board of Governors (assuming the previously nominated Marvin Goodfriend is confirmed as expected).
  • Trump announces new tariffs. Yesterday, amid speculation that the United States could pull out of NAFTA as Trump administration officials meet to negotiate trade terms with Canada and Mexico, the White House announced new tariffs on washing machines and solar panels. While trade tensions have primarily surrounded the U.S. relationship with China (NAFTA notwithstanding), the move will actually impact South Korea to a much greater extent. Although, China is not off the hook just yet as U.S. Commerce Secretary Wilbur Ross, speaking at the World Economic Forum, suggested that steel and aluminum may be next, which would put China in the crosshairs.

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Click Here for our detailed Weekly Economic Calendar

Wednesday

Thursday

  • Wholesale Inventories (Dec)
  • Advance Goods Trade Balance (Dec)
  • New Home Sales (Dec)
  • LEI
  • Germany: Consumer Confidence (Feb)
  • Germany IFO Business Climate (Jan)
  • Italy: Industrial Orders & Sales (Nov)
  • Canada: Retail Sales (Nov)
  • ECB: Main Refinance Rate
  • ECB: Marginal Lending & Deposit Facilities
  • BOJ: Minutes of Policy Meeting
  • Japan: CPI & PPI (Dec)

Friday

 

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