The Market Today
S&P Hits New All-Time High on Easing Trade Fears
by Craig Dismuke, Dudley Carter
Mortgage Applications Show Decent Results, for a Change: Mortgage applications for the week ending August 17 rose 4.2%, the best week since mid-June for applications. Purchase applications rose 2.9%, which was not quite enough to keep the 4-week average from sliding another 1.4%. The 4-week average is now down 10.8% from its peak in May and is at its lowest level since November 2017. Rising mortgage rates are adding to the affordability challenges in housing. Refinance apps rose a more impressive 6.0% as 30-year jumbo rates dropped from 4.73% to 4.68% and 15-year mortgage rates fell from 4.27% to 4.25%. Conventional 30-year rates held steady at 4.81%, remaining near their May peak of 4.86%.
Existing Home Sales Give Housing Data Another Shot at Showing Any Traction: At 9:00 a.m. CT, the Existing Home Sales report for July is expected to show sales inch up 0.4% MoM. Any kind of rebound would be welcomed news after sales have dropped 3.9% over the past two reports. Moreover, sales are down 5.9% from their peak back in December.
FOMC Minutes Likely to Support September Hike, Offer More Insight into Yield Curve Conversation: At 1:00 p.m. CT, the FOMC’s August Meeting Minutes are slated for release. The August meeting appeared to tee up a September rate hike with a glowing assessment of U.S. economic activity, and no signs of concern. Of interest will be the discussions on the yield curve.
Yesterday – Stocks Finally Did It: While it failed to hold it through to the close, the S&P 500 finally broke above its previous all-time high from January 26. At its intraday peak, the index had risen 0.57% to 2,873.23, finally breaking above the 2,872.87 mark from late January. The index has generally trended higher since March amid a rebound in U.S. activity in 2Q and positive quarterly corporate earnings. This week, hopes of a possible trade breakthrough in the U.S.-China spat have lifted sentiment globally. After testing its current record close value, the index pulled back to settle up 0.2% at 2,863. The Dow was a bit firmer with a 0.3% gain and closed at its highest mark since February 1. The Nasdaq outperformed those two with a 0.5% improvement. After grinding higher overnight, the Treasury curve pushed higher from Monday’s multi-week lows. The 2-year yield added 1.0 bps to 2.60%, the 5-year yield rose 1.4 bps to 2.73%, and the 10-year yield added 1.1 bps to 2.83%. Yields had moved even higher, but fell briskly just before the close on a breaking news alert that President Trump’s former personal attorney had plead guilty to multiple charges, including breaking campaign finance laws. The Dollar dropped for a fifth session and the greenback has fallen 1.5% over that period from its highest level in fourteen months.
Overnight – Political Headlines Push U.S. Assets Around: Global equities were mixed but mostly positive overnight and sovereign yields have moved in different directions. Asian equities outside of China were mostly positive. After two days of solid gains in anticipation of this week’s trade meetings with the U.S., which begin today, Chinese shares slipped 0.6%. European equities erased an opening drop to move slightly higher for the day. While auto companies remain a consistently large drag because of weaker profit guidance from a German auto-parts producer, the broader early drop in Europe tracked opening weakness in U.S. equity futures. Sharper swings for U.S. assets at the open of the overnight session have moderated ahead of U.S. trading. Headlines hit the wires after equity markets closed Tuesday, indicating that President Trump’s former personal attorney admitted to breaking campaign finance laws and told a judge that he did so at the direction of the president. Futures pushed lower at the open but have since trimmed those losses. Treasury yields are also off their lows, with the 2-year yield unchanged while the 10-year yield remains down 0.7 bps. The Dollar is trading lower for a sixth consecutive session.