Daily Market Color

Firm Risk-on Tone as Oil Prices Surge

US Stocks rallied for the third straight day while Treasuries and swaps sold off as a bounce in oil prices and better-than-expected economic data boosted investor sentiment.  WTI crude is trading up nearly 7% to $31/barrel, further rebounding from last week’s twelve-year lows.  The move comes after conflicting statements from Iran with regards to the country’s level of support for the Russia/Saudi-led production freeze proposal.  Iranian Oil Minister Bijan Zanganeh met with his counterparts from Venezuela, Iraq, and Qatar in Tehran, appearing to endorse the first agreement between OPEC and non-OPEC producers in 15 years.  However, some skepticism remains over Iran’s willingness to honor the production freeze, as a separate Iranian official said they would continue increasing output until reaching levels achieved before the 2012 trade sanctions.

Today’s US economic data calendar was robust and generally supported the risk-on sentiment.  Industrial Production rose 0.9% in January, easily beating consensus expectation for a 0.4% increase.  The headline number was the first monthly increase in three months and the largest expansion since May 2010.  The boost in production suggests that the factory sector may be bottoming out, thanks in part to more seasonably appropriate weather fueling demand for utilities.  Other data showed that housing starts unexpectedly fell, but that producer prices and underlying producer inflation both rose in January.

Aside from the data, investors will monitor the January FOMC minutes released at 2pm ET.  St. Louis Fed President Bullard (hawk, voter ‘16) speaks this evening.

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