Economist's Insights

Today’s Trading Activity – Tax Talk Boosts Stocks and Treasury Yields

Aug 22, 2017

Pre-market open trends proved prescient in predicting how U.S. trading would unfold. Stocks jumped early as futures had predicted and climbed almost ceaselessly throughout the day. All three major U.S. indices closed near session highs. The Dow rallied 196 points, or 0.90%, to notch its best day since late-April. The S&P added 24 points, or 0.99%, 0.01% shy of its best day over the same period. The Nasdaq outperformed, by gaining 1.4% in its best session since the end of June. Tech companies were top performers but the strength was contagious. Six of the 11 S&P sectors gained more than 1% while the rate-sensitive real estate sector faltered as Treasury yields climbed. Treasurys had been under pressure overnight but yields climbed further in U.S. trading. The 2-year yield added 2.0 bps to 1.32% while the 10-year yield finished up 3.1 bps at 2.21%. The Dollar rallied and completely erased Monday’s sharp loss. With a quiet economic calendar, and in the absence of anything significant on the geopolitical front, the optimism was attributed to a Politico report describing positive developments on the tax-reform front.