Daily Market Color March 15, 2018Kudlow Boosts Dollar, Dodd-Frank Rollback Progresses US financial markets held within a tight range throughout the trading session as the positive sentiment from today’s strong economic data releases was tempered by the news of Special Counsel Robert Mueller issuing a subpoena for the Trump organization as the investigation into Russia’s meddling with the 2016 election continues. Major stock indices were mixed, as the DJIA gained 0.5% while the S&P 500 (-0.1%) and Nasdaq (-0.2%) posted marginal losses. US Treasurys experienced a mild selloff as yields/swap rates climbed 1-3bps across the curve in a bear-flattening pattern. The spread between 2- and 10-year Treasury yields narrowed to less than 55bps – its lowest level in more than a month. Short rates continued to grind higher as 3 month LIBOR set just under 2.18%, its 27th consecutive daily increase reflecting a 38 bp increase during that period. The US dollar rose 0.5% today against major currencies, driven by pro-dollar comments from newly appointed Chief Economic Advisor Larry Kudlow. Labor, Price Data Remain Steady A relatively light day of key economic data releases included a report from the Labor Department which showed initial jobless claims in the US holding near the lowest level since December 1969. The number of new claims for the week ended March 10th declined 4,000 to a seasonally adjusted 226,000 (228,000 expected), and the four-week moving average of claims decreased by 750 to 221,500. Also detailed in the report, the number of continuing claims inched higher by 4,000 to 1.879 million for the week ended March 3rd. Other key economic data on the day included US import prices, which climbed 0.4% last month, exceeding expectations of a 0.2% gain, albeit a mild downturn from January’s +0.8% level. Much of the recent climb in import prices has been attributed to the decline of the dollar, but regardless, the trend higher in prices aligns with the Fed’s view of firming inflation in the US and further supports a rate hike at the FOMC policy meeting next week. Excluding petroleum, import prices climbed 0.5% (+0.3% expected). Senate Passes Dodd-Frank Rollback In regulatory news, the Senate worked through their disagreements and passed a bill with a vote of 67-31 that would lessen some of the restrictions of Dodd Frank. Some of the changes within the bill include an increase of the SIFI threshold to $250 billion from $50 billion as well a change in classification of municipal debt. The bill will not appear to have a significant impact on Wall Street as it did not include many of the items requested. Although there was an ease in regulation of capital requirements for custodial banks, this relief will not have an impact on the larger financial institutions. The next step for the bill is to advance to the House where it is expected to face opposition. Jeb Hensarling, the House Financial Services Committee Chairman has voiced a need for more changes and does not believe the bill has gone far enough. Therefore, it is likely that there will be more compromise necessary before the bill can advance for the President’s signature. While Congress is working out its differences over Dodd-Frank amendments, CFTC Chairman Christopher Giancarlo stated that he plans to make changes to Dodd-Frank regulation. He indicated a desire to “better align to inherent market dynamics, fully allow US swap intermediaries to fairly compete in world markets and begin to reverse the tide of global market fragmentation.” He was not specific on the changes he intended to propose, but this is promising news for all market participants.