Daily Market Color May 19, 2017Oil Surges Heading into OPEC Meeting While Stocks Rebound and Treasurys Slide as Political Drama Fades In today’s trading session, the most-recent market turmoil stemming from Wednesday’s political drama in Washington continued to fade, as stocks rebounded from their worst selloff of the year and demand for US Treasurys abated. All three major equity indices are currently up 0.6%-0.9% on the day, narrowing weekly losses to roughly 0.3%. Helping to give a boost to energy shares, crude oil surged 2% ahead of next week’s OPEC meeting in Vienna, where it is widely expected that an agreement will be reached to expand and extend the existing production cut accord. After a five percent gain this week, a barrel of West Texas Intermediate crude oil is trading above $50 for the first time in nearly a month. US Treasury yields climbed 1-3 basis points on the day, bringing the 10-year note yield back above 2.24% after dipping to as low as 2.18% on Wednesday. The US dollar reversed its gains from yesterday’s session and traded 0.6% lower on the day against major currencies. The dollar posted an average weekly loss of 1.3% against other major currencies, highlighted by a 2.2% drop against the euro. In the morning, markets were treated to a dovish perspective of the US economic outlook by St. Louis Federal Reserve President James Bullard, who in speaking at the Washington University in St. Louis, questioned the need for additional rate hikes by the Fed. Of particular concern to Bullard has been consumer price data, which he believes “have surprised to the downside in recent months,” rendering the Fed’s current path of two additional rate hikes in 2017 to be “overly aggressive relative to actual incoming data on U.S. macroeconomic performance.” Bullard’s stated preference is for only one more Fed tightening in 2017, and then a pause in any future Fed action until such time as the economy heats up a bit more. He also downplayed the concern of a continued drop in the unemployment rate, which currently sits near decade lows, explaining that “low unemployment readings are probably not an indicator of meaningfully higher inflation over the forecast horizon”. Next week, financial markets will be presented with a bevy of housing and GDP data, along with the minutes from the May FOMC meeting. In the global political landscape, close tabs will be kept on the progress of the ongoing investigation into Russia’s involvement with last year’s election, while President Trump embarks on an eight-day trip to meet with leaders from several Middle Eastern and European nations. Market participants will also be watching the tape for news out of Brazil, as Brazilian President Michel Temer refuses to step down, despite calls for his resignation, after the recent corruption allegations which hit Brazil’s financial markets hard.