The Market Today
Quiet Week and Washington Break Leave Markets to Digest Recently Mixed Data
by Craig Dismuke, Dudley Carter
Today’s Calendar – Quiet Week of Data; Washington Takes a Break: Last week’s economic data was mostly disappointing, with the primary exception of strong July labor data on Friday. Longer Treasury yields remained range-bound with the 10-year yield actually falling 2 more basis points during the week. Heading into this week, the markets are likely to continue digesting last week’s data as this week’s should be less impactful, with the exception of July’s CPI inflation report on Friday and a speech from New York Fed Bank President Dudley on Thursday. This week’s data kicks off this afternoon with the June Consumer Credit report, expected to show credit growth drop from $18.4 billion in May to $15.3 billion.
In addition to the light calendar this week, Congress is finally on summer break and the President is taking a working vacation in New Jersey likely limiting the fiscal policy headlines for the next few weeks. However, when they return after Labor Day, tax reform is expected to be front-and-center with just as many hurdles as the healthcare law faced. Moreover, a spending resolution will need to be passed in September and the debt ceiling raised – both issues that one would normally expect to be uneventful given the Republicans’ control of both chambers and the White House. But healthcare showed that “normal” may be elusive.
Today’s Calendar – Treasury Yields Add to Friday’s Rise in Quiet Overnight Trading: Asian markets, which had closed by the time Friday’s U.S. payroll report was released, did not waste their first opportunity to cheer the better-than-expected U.S. hiring and earnings figures. The major exchanges across the Asian-Pacific rose Monday following an eighth record close for the Dow on Friday. The momentum has stalled in Europe, however, where most national exchanges are weaker, leaving the pan-European Stoxx 600 down 0.2%. U.S. equity futures are modestly positive despite the mixed emotions globally and the weaker sentiment in Europe. Global sovereign yields inched higher across the term structure and Treasury yields have added to Friday’s rise; the 2-year yield is up 0.8 bps to 1.36%, the 5-year yield is up 1.1 bps to 1.83%, and the 10-year yield is 0.7 bps higher at 2.27%. In currencies, the Dollar gave back a small part of Friday’s jump but remains off its 15-month low set earlier last week. Other items that may be covered in Monday market reports: oil’s more than 1% drop, much weaker-than-expected industrial production in Germany, and the UN’s sanctions on North Korea announced over the weekend.
ICYMI – Weekly Market Recap for Week Ended August 4: Longer Treasury yields fell last week after auto sales dropped the most since 2010, the Bank of England dovishly cut their forecasts for growth and wages, and political uncertainty in the U.S. remained in focus. However, better-than-expected U.S. July payroll data spurred yields higher on Friday to limit the severity of the weekly curve flattening. Click here to see the full recap.