Daily Market Color

Economic Data Remains Robust as Treasurys Rebound, Stocks Pull Back

Weekly unemployment data released today provided further evidence of a healthy labor market.  The number of initial jobless claims for the week ended February 11th totaled a seasonally adjusted 239,000, an increase of 5,000 from the previous week, but below expectations of 245,000.  The reading remains well under the 300,000-threshold associated with a stable jobs market, and brings the four-week moving average to 245,250.  Continuing claims, which measures the number of workers receiving benefits for longer than a week, declined 3,000 from a revised 2.079 million level.

A report from the Commerce Department today displayed the number of housing starts falling 2.6% in the month of January to a seasonally adjusted pace of 1.246 million units (1.226 million expected), as single family home construction rose 1.9% while multifamily starts tumbled 10.2%.  Compared to a year earlier, homebuilding activity was up 10.5% in January.  The most promising figure in the report was a 4.6% surge in permits for future construction to a seasonally adjusted 1.29 million units.  The level represents the highest since November 2015, led by building permits in the South which exhibited their highest reading since 2007.

All three major US stock indices look poised to end their longest rally in three years, currently trading down 0.1% – 0.25%.  US Treasurys rebounded today, as yields/swap rates decreased 2-5 bps across the curve, pushing the yield on the 10-year note below 2.45%.  The US dollar fell 0.3% against a basket of major currencies, aided from falling lower by today’s positive economic data.  Crude oil fluctuated near even for the bulk of the trading session, with WTI hovering near $53.35/barrel and Brent close to $55.70/barrel.

Abroad, minutes from the European Central Bank’s January policy meeting were released today, providing details of the committee’s decision to hold steady its existing bond-purchasing program.  Specifically cited in the minutes were risks related to the current political atmosphere, suggesting the ECB should “remain patient and maintain a ‘steady hand’” in the face of “a high level of uncertainty…related to the political environment at the global level and within the euro area.”  In addition to the lack of clarity surrounding US policies, the eurozone may see as many as four elections by some of their biggest economies this year, including Germany, France, the Netherlands, and Italy.  While many expect the ECB to begin winding down the quantitative easing program at the beginning of 2018, ECB President Mario Draghi has made sure to have all options at the disposal of the central bank until inflation reaches the 2% target.  Major European stock indices declined for the first time since February 6th today while the euro gained 0.7% against the dollar.


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