Equities Finish Week Higher as Yields Slip

 

Breaking the trend of the previous four trading sessions, major US stock indices held onto strong gains into the close, finishing the volatile week on a high note.  The tech heavy Nasdaq rose 1.75% in its first positive session of the holiday-shortened week, while the S&P 500 (+1.6%) climbed above its 50-day average.  The DJIA climbed nearly 350 points on the session, capping a weekly gain of 0.6%.

 

 

US Treasurys extended their rally as yields/swap rates declined 1-7bps across the curve in a bull flattening pattern.  The 10-year note yield slipped 5bps to 2.87% after reaching as high as 2.95% on Wednesday after the release of the FOMC’s January meeting minutes.  The yield on the 2-year Treasury edged 1bp lower, narrowing the 2s-10s spread to 63bps – the lowest its been since the beginning of February.

 

 

In commodities, crude oil posted its second consecutive weekly gain after the shutdown of a key oil field in Libya added to this week’s upbeat report of decreased inventories in the US.  The El-Feel oil field in Libya, which is responsible for more than 60,000 bpd in production, was forced to shut down after guards at the site refused to work in protest over pay.  Both WTI and Brent crude futures welcomed the news, posting gains of more than 1.2% to $63.50/barrel and $67.30/barrel, respectively.   

 

 

Mnuchin Remains Bullish on Economy

To the surprise of no one, Treasury Secretary Steven Mnuchin downplayed the growing concerns in financial markets related to rising inflation and the forever blossoming government debt.  In an interview yesterday afternoon, Mnuchin lobbied that “you can have wage inflation and not necessarily have inflation concerns in general” as he addressed the potential for consumer price growth to accelerate at a quicker than desired pace.  He also referenced the nation’s declining reliance on the rest of the world for oil, stating that “we’re no longer fully dependent on foreign oil, energy is always a big concern in terms of inflation.”  As it pertains to increased government spending, Mnuchin deflected the possibility of any negative consequences and said he wasn’t concerned, while stressing the importance of military and infrastructure spending.