Daily Market Color

Equities, Treasurys Fall for Second Straight Day

Home Prices Continue to Rise

A very light day of economic data releases featured the S&P CoreLogic Case-Shiller Indices, which displayed home prices in 20 major cities rising at their fastest annual rate in more than three and a half years at 6.4% for November.  A shortage of inventories continues to be the largest catalyst in the acceleration of property values.  The biggest MoM gains were recorded in San Francisco (+1.8%) and Las Vegas (+1.1%).



Euro-area’s Economic Expansion

Growth in the eurozone economy was reported at a robust 0.6% during the fourth quarter of 2017.  This matched expectations of a 19th straight quarter of expansion, albeit a marginal 0.1% decline from the previous three-month period.  For the entirety of 2017, the euro-area GDP grew at a 2.5% pace – its fastest in the past decade.  Particular strength was recorded in the French and Spanish economies, where 2017 Q4 growth tallied 0.6% and 0.7%, respectively.  Adding to the positive outlook for the euro-area, earlier this month consumer confidence was released at a 17-year high.  It remains to be seen whether the continued growth will translate into higher levels of inflation in the eurozone, prompting the ECB to be extra cautious with the signaling of the eventual removal of monetary stimulus in the region.  



Spending May Overshadow State of the Union

In tonight’s State of the Union Address, President Trump is expected to push for an infrastructure bill and funding for increased military spending. However, deficit hawks may have the upper hand when it comes to funding any large scale projects, as the tax cuts leave the government short on options outside of deficit spending.  Long term spending on larger projects will likely take a backseat to the ongoing work to pass the budget for 2018.  As it stands now, when the current continuing resolution expires on February 8th, Congress is not expected to have a longer term deal in order.  This will either result in another stopgap bill or force a second government shutdown of 2018.  While President Trump may announce his intentions, getting this through Congress could prove to be a tougher challenge in the short term.  



Equities, Treasuries Sell Off Again

All three major US stock indices suffered a second straight day of losses, and again other assets didn’t fare much better.  Equities posted their largest two day losses since May 2016, as the DJIA fell 1.4%, S&P 500 decreased 1.1% and Nasdaq dropped 0.9%.  The biggest declines were observed in the healthcare sector after it was reported that Amazon, Berkshire Hathaway, and JPMorgan would be partnering to form their own healthcare company.  The yield on the 10yr Treasury continued to climb higher, finishing near 2.72% (+2.5bps on the day).  Across the curve, yields rose about 1-3 bps in a further bear steepening pattern. The USD gave back some of the gains from yesterday and ended down vs. most major currencies (-0.2% vs. EUR , -0.5% vs. GBP, – 0.2% vs. JPY and -0.3% vs. CHF). In commodities, WTI crude oil futures fell 1.1% on the day to $64.40/barrel on the news that that US crude stockpiles increased by 3.23 million barrels last week.     


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