The Market Today
Fedspeak and Housing to Headline a Relatively Quiet Week for U.S. Economics
by Craig Dismuke, Dudley Carter
This Week’s Calendar – Fedspeak and Housing to Headline a Relatively Quiet Week for U.S. Economics: Relative to last week’s heavy-hitting economic calendar, this week’s schedule could prove to be somewhat stodgy. However, with a number of Fedspeakers from both sides of the policy aisle scattered throughout the week, there is always the chance that it’s not. New York Fed President Dudley and Chicago Fed President Evans will make remarks today. Both have historically sided with the doves when it comes to policy decisions and both are 2017 voters. Fed Vice Chair Fischer, Boston Fed President Rosengren, and Dallas Fed President Kaplan are on the schedule for Tuesday. Fischer is seen as one of the more influential members and both he and Kaplan are current voters. Fed Governor Powell, who votes this year, will speak on Thursday and Kansas City Fed President Mester will wrap things up on Friday. Given the softer economic data recently, markets will be keen to hear from these members as to why the Fed continues to be so sanguine on the economy and inflation – a position that has precipitated the Fed sticking with its call for three hikes per year and the beginning of phasing out reinvestments of portfolio cash flows.
The only major reports to be released this week are May’s existing home sales report on Wednesday and new home sales report on Friday. Usually, these wouldn’t be significant on a stand-alone basis. However, given the recent trend weakness across the housing data as a whole, analysts will scrutinize these reports for signs of a positive turnabout. Existing home sales are expected to have declined 0.4% in May while economists are looking for a 3.8% bounce back in the pace of new homes sold.
Overnight Activity – Equities Higher as Macron Locks Up a Majority, Formal Brexit Negotiations Begin: Global equities are off to a strong start this week which has pressured yields on the safest sovereign debt. Shares of French companies are among Europe’s top performers after recently elected President Macron solidified a comfortable parliamentary majority in Sunday’s final round of voting. The results should help Macron push through some of the major reforms he campaigned on. U.S. equity futures are signaling a positive start for the major indices with a 0.8% gain for the Nasdaq roughly doubling gains for the Dow and S&P. Safer European sovereigns were under pressure in response which has helped to push up Treasury yields. The 2-year Treasury yield is 2.1 bps higher at 1.34% while the 10-year yield rose 1.4 bps to 2.17%. As to the economic data, Japan reported an unexpected trade deficit for May as gains in exports outstripped gains in imports; both hit multi-year highs. The U.K.’s Brexit Secretary is in Brussels as formal negotiations with the EU begin, just one year shy of the initial shocking referendum vote.
ICYMI – Last Week’s Market Recap: Another round of weak inflation data last week led another set of softer economic releases. The market response, with yields moving lower, shows that investors didn’t buy into the optimistic story as told by the Fed’s latest policy decision and outlook and projections. Click here for the full recap.