Daily Market Color

Housing, Consumer Confidence Data Boost Stocks, Halt Treasury Rally

US economic data reported today painted a robust picture of the economy.  The S&P CoreLogic Case-Shiller Housing Price Index, which measures home prices across the nation, displayed the steepest jump since mid-2014, rising 5.9% in the 12 months ended in January.  Contributing the largest upticks in value were houses in the northwest, notably Seattle (+11.3%) and Portland (+9.7%).  Looking forward, climbing home prices and shrinking inventories may pose a significant challenge for home sales, as increasing levels of buyers struggle to afford getting into the market.  In a separate report, consumer confidence rose to its highest level in more than 16 years during March.  The overall confidence index increased to 125.6 for the month, outpacing expectations of a 114 reading, as Americans’ views of current conditions, consumer expectations, and job growth surged.  With the survey limited to data received up until March 16th, the Trump administration’s recent healthcare bill failure risks negatively impacting future consumer confidence readings, which have been moving consistently higher since November’s election.

Crude oil opened higher after activity at a pipeline in Libya was halted due to political instability.  Libya, which is exempt from January’s OPEC supply-cutting agreement, saw its daily production fall 20% following the shutdown of its largest pipeline, located in the Sharara field.  At this point, a date for the reopening of the facility has not been determined, with the production disruption serving as a reminder of the volatile production environment that exists in the nation.  Combined with this past weekend’s agreement amongst OPEC and non-OPEC ministers to review a 6-month extension of the current output reduction, the disruption in Libya precipitated a bullish tone for oil prices.  However, increased US production continues to be the elephant in the room threatening to offset global cuts (both intentional and unintentional), with US production currently residing at record highs.  Crude oil prices increased more than 1.5% for the session, with WTI rising to $48.60/barrel and Brent to $51.60/barrel.

Today’s data prompted a reversal of the risk-off trading experienced by financial markets over the past week.  All three major stock indices are currently trading 0.75% – 0.95% higher on the day as the DJIA looks poised to break its 8-session losing streak, supported by robust gains in bank shares.  Treasurys have edged lower, with yield/swap rates increasing 2-5 bps across the curve, bringing the yield on the 10-year note near 2.40%.  Today’s movement in the US dollar value was strongest against the South African rand, adding a 1.8% gain today to yesterday’s 2.5% rise, amid political turmoil in the country.           

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