Daily Market Color

Financial Markets Fluctuate After Strong Trade Data with FOMC Minutes Looming

Both bond and equity markets oscillated between gains and losses throughout the day with the release of March’s FOMC meeting minutes set for tomorrow’s agenda.  US Treasurys reversed a portion of yesterday’s rise, as yields/swap rates increased 1-5 basis points across the curve, bringing the yield on the 10-year note back above 2.36%.  All three major US stock indices finished 0.05%-0.20% higher on the day, led by shares in energy producers whose stock increased following a surge in energy prices.  Crude oil jumped more than 1.75% during the trading session to four-week highs, with WTI reaching $51.15/barrel and Brent touching $54.25/barrel.  The US dollar posted marginal gains (+0.2%) against major currencies, but shed 0.5% vs. the South African rand, ending a six-day rally amid political turmoil after the dismissal of the nation’s finance minister.    

US economic data reporting on the day kicked off with a 9.6% reduction in the trade deficit during February to $43.6 billion, lower than initial estimates of $44.5 billion.  The narrowing of the gap was generated by a 1.8% drop in imports and a 0.2% rise in exports.  The largest monthly import declines were recorded in consumer goods (-$3.1 billion) and autos (-$2.7 billion), which were partially offset by an increase in crude oil imports (+$1.3 billion).  February’s exports totaled $192.9 billion, the highest level since December 2014, led by foreign demand for automobiles and parts.  The trade gap continues to be the largest with China at $23 billion, however the first two months of 2017 has brought upon a narrowing of that gap by nearly 5%.  The topic of trade will most certainly be discussed at the scheduled meeting between President Donald Trump and Chinese leader Xi Jinping this Thursday.

Other data released today included a steady 1% gain in factory orders during February, which matched median forecasts.  Detailed in the report, durable goods orders rose 1.8% in the month, attributed largely to a 56% monthly gain in aircrafts and 0.3% increase in vehicles.  Nondurable goods contributed a 0.2% growth for the month, led by strength in chemicals.  Casting a shadow on the headline figure, core capital goods orders (nondefense, excluding aircrafts) fell 0.1% in February, marking a second consecutive month of lackluster performance.

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