Yesterday’s Trading – Unchanged Equities Hide Tumbling Crude Prices, House Health Care Vote, Sinking Dollar, and Rising Yields:
May 5, 2017
U.S. stocks ended little changed in the final session before Friday’s payroll report, a result that disguised a bit of intraday volatility and notable moves in other asset markets. The S&P ended up 0.1% but only after paring a 0.3% drop just before lunch. That low point for the S&P coincided with a nearly 5% drop in U.S. crude prices. U.S. crude traded with a $45 handle for the first time since before OPEC announced it would cut production (November 2016). Brent crude fell below $50 per barrel, also reaching a more than five month low. U.S. production and inventory data continue to be a more powerful force (drag) than any price lift from OPEC pumping less. Shortly after lunch, the House passed an amended version of the AHCA that repeals certain portions of the ACA, modifies others, and leaves certain facets intact. As is, the bill is expected to face serious headwinds in the Senate. Treasury yields rose for a second day with the 2-year note up 1.2 bps (1.29%) and the 10-year yield 3.6 bps higher (2.32%). Treasury yield changes were modest relative to those on German debt after the pro-EU Macron arose victorious from Wednesday night’s presidential debate. German 10-year debt rose 6.8 bps and the spread between French and German yields tightened to its smallest level of the year. These same forces rallied the Euro which sank the Dollar.