Financial Markets Remain Tempered on Geopolitical Uncertainty

Mounting geopolitical tensions continue to weigh on financial markets, with today’s bombing in eastern Afghanistan by the US military creating further uncertainty around the future of American involvement in international conflict.  US Treasurys traded close to unchanged throughout the session as investors assessed the validity of President Trump’s comments yesterday concerning the possibility that Janet Yellen’s term as Fed Chair may be extended in 2018.  Additionally, Trump expressed his preference that interest rate hikes be tempered going forward in an effort to prevent the US dollar from getting too strong.  With bond markets closed tomorrow, the yield on the 10-year Treasury finished the week just below 2.24%.  All three major US stock indices are currently down 0.25%-0.5% in the first day of corporate earnings season, highlighted by strong results from Citigroup and JPMorgan Chase.  The US dollar edged higher, up 0.1% against major currencies, reversing losses from earlier in the session.  Crude oil posted marginal losses following yesterday’s report that showed US production expanding at its highest rate in over a year.  WTI settled near $53/barrel while Brent crude finished close to $55.75/barrel.           

Adding to the inflation outlook for the economy, the Labor Department reported producer price data for the month of March.  The Producer Price Index (PPI), which measures prices among US businesses, declined for the first time since last August, down a seasonally adjusted 0.1% last month as falling energy prices weighed on the index.  Year-over-year, producer prices recorded a 2.3% advance, representing the largest annual rise in five years.  In a separate report from the Labor Department, initial unemployment claims for the week ended April 8th totaled a seasonally adjusted pace of 234,000, a 1,000 decrease from the previous week.  It was the third straight week of declines and 110th consecutive period of claims below the 300,000 threshold associated with a healthy labor market.  The less-volatile four-week moving average of claims fell 3,000 to 247,250, supporting the notion that last month’s sub-par payroll growth may have been an outlier in the overall employment picture.  Other data on the day included the preliminary reading of the University of Michigan’s survey of consumer sentiment for April, which displayed an increase to 98.0, representing the highest mark since November 2000.