Economist's Insights

Today’s Trading Activity – Markets Focus on Harvey Impact

Aug 28, 2017

Stocks failed to hold an opening bounce Monday and the Dow and S&P ended the day almost unchanged. The Nasdaq outperformed with a gain of 0.28%. Within the S&P, the energy and financials sectors were the worst performers. Energy companies faltered as U.S. crude fell more than 2.5% on expectations of less demand from Houston-area refiners. In addition to less demand for crude inputs, the indefinite suspension of refiners in response to extreme flooding will also mean less gasoline output. Gas prices rose 3.7% Monday, expanding the spread between crude and gasoline to its widest since August 2015. Financials slipped with insurance companies dropping on expectations for a surge in claims in Houston and banks edging down with Treasury yields. The 2-year yield fell 0.6 bps to 1.33%, the 5-year yield dropped 1.7 bps to 1.74%, and the 10-year yield lost 0.9 bps to 2.16%. After swinging softly between gains and losses in morning trade, the sharpest yield shift occurred after results for the monthly 5-year Treasury auction were announced. The bid-to-cover was unchanged at 2.58 in the August auction but the take down by primary dealers (17.5%) was the lowest on record, signaling strong demand elsewhere. The Dollar finished at session lows after a report that North Korea fired a missile over Japan boosted demand for the Yen.