Daily Market Color

Financial Markets Remain Muted as U.S. Healthcare Vote Delayed Again

Trading activity in the financial markets remained relatively tempered to close the week amid delays to the vote on US healthcare reform.  Initially expected to conclude yesterday, a Congressional ruling on the bill was postponed again this afternoon, with a great deal of uncertainty surrounding whether enough GOP support has been garnered for it to pass.  While a swift approval of the proposal would certainly be a positive indication for the acceptance of future reform, market pundits having varying opinions over the possible market impact of a “No” vote on future fiscal policy priorities such as tax reform.  Treasurys traded within a tight range again today, as yields/swap rates are currently down 1-2 bps across the curve with the yield on the 10-year note poised to finish near 2.4% at monthly low levels.  Major US stock indices finished mixed for the session, capping off the worst week for equities in 2017, with the DJIA and S&P 500 down 0.1% – 0.3% while the tech-heavy Nasdaq gained 0.2%.  The US dollar similarly had a rough week, shedding 0.7% against major currencies.

On the economic data front, new orders for durable goods climbed 1.7% during the month of February, outpacing expectations of a 1.5% rise and building upon a strong +2.3% revised level in January.  Often volatile aircraft orders buoyed the headline figure, increasing 27% MoM, while orders of motor vehicles were modestly lower (-0.6%).  Excluding transportation, orders advanced a mild 0.4%, below median forecasts of +0.8%.  Additionally, orders for core capital goods declined 0.1% (+0.5% expected), signaling weakness in business investment.  In contrast, shipments of core capital goods surged 1% last month, generating YoY growth of 2.1% that stands as the first positive annual reading for this index since August 2015.  Unfilled orders for capital goods also rose in February, up 0.2%.  

Abroad, the European Central Bank received fresh data that would support a tightening of its long term accommodative monetary policy.  A flash of the region’s March Composite PMI Index displayed a reading of 56.7, the highest level since April 2011.  The report detailed stronger than expected results across all sectors in the euro zone broadly, and France and Germany more specifically, foreshadowing steady economic growth in the first quarter heading into crucial national elections.  While the figures help to alleviate concerns of downside risk for the ECB, inflation measures will ultimately be the determining factor in policy adjustment as the committee looks for sustained consumer price growth near its 2% target level.

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