- Domestic equities closed broadly higher, partially recouping losses from worst weekly decline since 2016. S&P 500 Index +1.4%, Dow +1.7%, Nasdaq +1.6%, Russell 2000 +0.9%.
- Materials led sector performances; technology, energy outperformed as well. REITs, utilities lagged despite closing higher for the day.
- Treasuries continued to soften. 10-year yield +3 basis points (0.03%) to 2.86%.
- NYSE breadth positive (2.8:1), trading volume fell back in line (101% of 30-day average).
- Commodities: WTI crude oil (+0.2% to $59.32/bbl.) slightly higher as supply worries persist (details below), COMEX gold +0.7% to $1324.20/oz., industrial metals mostly lower.
- Economic data: Domestic infrastructure plan released, which calls for $200 billion in federal spending with hopes for an additional $1.3 trillion from state, local, and private investment.
Overnight & This Morning
- U.S. equities open lower; focus remains on short volatility trading unwind and upward pressure on interest rates.
- European stocks off session lows. U.K. headline inflation held at 3% in January; core accelerated to 2.7% from 2.5%, both above expectations, pushed the pound higher. FTSE 100 flat, STOXX Europe 600 -0.1%, DAX -0.1%.
- Asian markets mostly tracked Monday’s U.S. gains, with Japan an exception. Nikkei -0.6% as the yen surged to five-month highs vs. the dollar; Shanghai Composite +1.0%, Hang Seng +1.3%.
- Treasury yields edged lower; 10-year yield -3 basis points to 2.83%. Focus on deficit spending, inflation figures due out tomorrow.
- Commodities supported by a weaker dollar. Oil -0.3% at $59.10/bbl., gold +0.5% to ~$1329/oz., copper +1.8%. U.S. Dollar Index -0.4%.
- Economic releases: NFIB Small Business Optimism better than expected, near record high (106.9 vs. 105.3 consensus, 104.9 prior, 107.5 all-time high in November 2017). Percentage saying now a good time to expand at all-time high (32%).
- Oil slide continues after OPEC ups global production forecast. In its monthly oil market report, released yesterday, the Organization of the Petroleum Exporting Countries (OPEC) increased its forecast for crude supply by 1.4 million barrels per day (BPD) vs. last month’s estimates; the forecast for demand increased by 60,000 BPD. The increase in its supply forecast is driven almost entirely by U.S. production, which in November topped 10 million BPD for the first time since 1970 and is expected to surpass Saudi Arabia’s production levels this year. This comes on the heels of a rebound in U.S. stockpiles, which had been declining the past few weeks.
- Why own bonds? With yields remaining low relative to history, and the possibility of price headwinds for bonds if rates continue to rise, some investors are asking why they should even bother owning bonds. However, stock market volatility in recent weeks has served as a reminder of the diversification benefit of bonds, even in the face of rising rates. In this week’s Bond Market Perspectives, due out later today, we take a look at how bonds have performed during periods of equity market weakness (both recent and historical).
- National Federation of Independent Business Small Business Optimism (Jan)
- UK: CPI & PPI (Jan)
- Japan: GDP (Q4)
- Japan: Machine Tool Orders (Jan)
- CPI (Jan)
- Core CPI (Jan)
- Retail Sales (Jan)
- Business Inventories (Dec)
- Eurozone: GDP (Q4)
- Germany: GDP (Q4)
- Italy: GDP (Q4)
- Eurozone: Industrial Production (Dec)
- Japan: Core Machine Orders (Dec)
- Japan: Industrial Production and Capacity Utilization (Dec)
- Empire State Mfg. Report (Feb)
- PPI (Jan)
- Philadelphia Fed Mfg. Report (Feb)
- National Association of Home Builders Housing Market Index (Feb)
- Total Net TIC Flows (Dec)
- Eurozone: Trade Balance (Dec)
- Import & Export Price Index (Jan)
- Housing Starts & Building Permits (Jan)
- of Mich. Sentiment (Feb)
- China: New Loan Growth and Money Supply (Jan)