Market Catches It’s Breath

Dow Closes Above 26,000 Again

After the first two trading days this week produced big swings in the US equity market, we had a relatively quiet day today allowing equity traders to catch their breath.  The DJIA remained over the 26,000 mark for all of the trading day today, but unlike the general trend lately all three major indices closed lower.  For the day, the DJIA was down (-0.37%), while the S&P 500 was down (-0.18%) and the Nasdaq was down (-0.03%).  The on-the-run 10yr US Treasury sold off on the day as well, bringing the yield on the 10yr is now up to 2.62% –  its highest level since last March.  Crude oil fell 0.1% on the day to close at $63.87 on news of stockpiles being drawn at record pace at the Cushing, Oklahoma delivery facility.  The market didn’t sell off too drastically as there is still sentiment that OPEC will cut production, which will drive prices higher and trigger increased US output.

 

 

Fed Fund Futures Start to Agree with Fed

For the first time the Fed Fund Futures market has priced in a greater than 50% probability of three rate hikes in 2018 – as the Fed has been suggesting in their Dot Plot and commentary.  Currently the market is pricing in an 87.9% probability of the first hike occurring in March, a 61.2% probability of the second hike occurring in June and a 52.9% probability of a third hike occurring in December.

 

 

US Homebuilding Eases From Decade Highs

The Commerce Department’s report on US homebuilding headlined a light day of economic data reporting.  Housing starts during the month of December tumbled 8.2% to a seasonally adjusted rate of 1.192 million units (1.275 million expected) – a steep decline from November’s decade-high level.  The single family sector accounted for the majority of the pullback, where starts declined 11.8%, as multifamily starts rose 1.4% MoM.  Helping to balance out the report, building permits remained robust at a 1.302 million seasonally adjusted rate per month, helped by the single-family component which improved to an 865,000 annualized pace – its highest since August 2007.  Overall, US homebuilding remains strong and homebuilder confidence is currently near its highest level since 2005.

 

 

Other key economic data points released today included a report from the Labor Department which showed initial jobless claims falling to the lowest level in the past 45 years.  The number of new claims for the week ended January 13th declined 41,000 to a seasonally adjusted 220,000 (249,000 expected), and the four-week moving average of claims fell by 6,250 to 244,500.  Also detailed in the report, the number of continuing claims increased by 76,000 to 1.952 million for the week ended January 6th.