Economist's Insights

Today’s Trading Activity – Stocks Claim New Records, Curve Flattens to New 10-Year Low after Positive Data, Fed Minutes

Jan 3, 2018

U.S. stocks climbed steadily throughout Wednesday’s session and all three major indices recorded a new all-time high close. Technology companies continued to be a bright spot in equity trading and the Nasdaq’s 0.84% was Wednesday’s best result. That strength helped the tech sector to a second place finish within the S&P. Energy companies held the title as the best daily S&P performer, with the sector tacking on another 1.53% to Tuesday’s 1.78% gain. Those companies benefited from more-than-2% gains for both U.S. and Brent crude; U.S. crude touched its highest level since December 2014. Stocks were supported by positive economic data but showed little intraday response to the reports. The stronger-than-expected manufacturing PMI and construction spending data and upbeat tone in the Fed Minutes had a more notable intraday impact on Treasury yields. The yield curve was lower before the ISM report briefly sent yields to their highs of the days. That move has dissipated ahead of the Fed Minutes which sent yields climbing again. The post-Minutes jump stuck on the short-end (consensus for continued rate increases) but faded for longer maturities (uncertainty about inflation and the forward path). On the day, the 2-year yield rose 1.2 bps to 1.93% while the 10-year yield fell 1.6 bps to 2.45% resulting in the related spread easing to 51.2, a new more-than-10-year low.