The Market Today
Quiet Week to End 2017
by Craig Dismuke, Dudley Carter
This Week’s Calendar – Quiet Week to End 2017: This week’s calendar only brings a handful of economic reports. The S&P CoreLogic Home Price Index for October is expected to show YoY prices rising 6.25% at 8:00 a.m. CT this morning. The Conference Board’s December read on consumer confidence is scheduled for Wednesday along with November’s Pending Home Sales report. November’s Advanced Goods Trade Balance report is scheduled for Thursday and may be the only economic report with the potential to move markets by any meaningful amount given the larger-than-expected trade deficit seen in recent reports.
Overnight Activity – U.S. Equities Weakened and Treasury Yields Climbed in Quiet Overnight Start to Another Short Week of Trading: Asian equities were mixed and most European markets remain closed for the holiday break leading to a nearly silent night of pre-U.S. trading. In Japan, data showed the unemployment rate fell unexpectedly to a new 24-year low of 2.7% in November and energy prices helped the national inflation measures firm a little more than expected. Stripping the effects of energy prices out of the headline (0.6%) and ex-fresh food core (0.9%) metrics, the “core-core” CPI index rose just 0.3% YoY. U.S. equity futures are weaker ahead of Tuesday’s session with contracts on the Nasdaq leading losses. The Dow and S&P are down modestly but a big drop within the last couple of hours has the Nasdaq down more than half of a percent. Apple is weighing heavily on the tech-heavy index after some downbeat demand reports related to the iPhone X. Treasury yields are a touch higher with the 2-year yield adding 1.7 bps to 1.91% and the 10-year yield gaining 0.5 bps to 2.49%. The 2-year yield continues to creep higher to new highs since late 2008. The 10-year yield remains near its highest level since March after jumping in the first half of last week.
ICYMI – December 22, 2017 Weekly Market Recap: The 10-year Treasury yield hit its highest level since March ahead of Congress passing and the President signing the Republicans’ tax reform bill. The 10-year yield rose more than 14 bps by Wednesday in the biggest three-day move since the election. By Wednesday afternoon, the House had voted in favor of the bill (twice) and the Senate had approved the changes to the tax code, sending it along to the President for his signature. Shorter-yields were less volatile which helped the spread between the 2-year and 10-year maturities hit its widest mark in more than a month. The President made tax reform official by signing it into law on Friday. Taxes were all the talk last week and markets more-or-less ignored the economic calendar. The personal savings rate dropped to a new cycle low as spending jumped more than incomes and durable and capital goods data was slightly weaker than expected taking revisions into account. But the biggest surprises were in the housing data. The NAHB’s housing market index rose unexpectedly to an 18-year high and new home sales rose the most in 26 years for the fast annualized pace since 2007. Click here to see the full recap.