Daily Market Color

Markets Struggle for Direction as Mixed Data Muddies Outlook

US stocks declined after oil’s recent rally ran out of steam, while Treasuries sold off marginally ahead of this afternoon’s $15 billion government bond auction.  Investors continue to try to gauge the strength of the economy, but recent US economic data hasn’t provided much reason for conviction one way or another.  Today’s releases showed the number of Americans filing for unemployment benefits unexpectedly rose last week to the highest level in over a year, while a separate report showed import prices increased in April for the second consecutive month.  Jobless claims have moved sharply higher in recent weeks, which raises concerns about the health of the labor market in light of last week’s weaker-than-expected April payrolls report.  Despite last week’s uptick, claims have now remained below 300,000 for 62 consecutive weeks, the longest stretch since the early 1970s.  The four-week moving average, which reduces some of the week to week volatility, increased to 268,250, the highest level in three months.  It’s worth noting that the one-month long Verizon strike may have contributed to the unexpected spike.  The 0.3% increase in prices for imported goods suggests the deflationary pressures from the strong dollar and lower oil prices may finally be subsiding. 

Aside from the data, investors continued to focus on corporate earnings, corporate and government supply, and a full schedule of Fed speakers.  Cleveland Fed President Mester, (hawk, voter ’16), Boston Fed President Rosengren (dove, voter ’16), and Kansas City Fed President George (hawk, voter ’16) are all scheduled to speak on various topics including inflation dynamics and the US economy.
 
All three major US stock indexes are currently down between 0.33% and 0.90%, while Treasury yields and swap rates are up 3-4 bps across most maturities.  WTI and Brent crude are currently down 0.50% and 1.00%, respectively.

 

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