Daily Market Color

Oil Surges on Iran, Iraq Cooperation, Adds Momentum to Stocks Hitting Record Highs

Oil Resumes Climb After Promising Rhetoric  Despite their often working at cross-purposes to OPEC, this weekend Iran and Iraq delivered comments which gave oil prices a bump based on their future expectations of crude production.  Speaking after a meeting with OPEC’s Secretary General on Saturday, Iranian Oil Minister Bijan Namdar Zanganeh stated his belief that the assemblage of oil-producing countries would honor the accord that was struck in September, and it is “highly probable” that OPEC reaches an agreement come November 30th in Vienna.  Jabbar Al-Luaibi, the Oil Minister of Iraq, added to the optimism when he clarified that while Iraq’s requests for exemption from the accord were “legitimate demands”, they should not get in the way of finalizing a broader deal.  Al-Luaibi went on to say that Iraq will work to make additional proposals in order to help facilitate compromise at the meeting.  The news triggered a surge in crude oil prices, pushing WTI up 4.35% to $48.35/barrel and Brent up 4.4% to $48.9/barrel.    


U.S. Stock Indexes Touch Record Highs
Led by energy companies whose shares benefited from the rally in oil, all three major U.S. stock indexes printed fresh all-time highs today.  In doing so, the S&P 500 rose above 2,190 (+0.60%), the DJIA topped 18,915 (+0.36%), and the Nasdaq surpassed 5,359 (+0.78%).  Also a catalyst to the rise in equities was the continued weekend speculation surrounding the future fiscal policies of President-elect Donald Trump, as three potential candidates, all prominent businessmen, emerged to fill the role of Treasury Secretary.  Wilbur Ross (billionaire distressed debt investor), Jon Gray (Global Head of Real Estate at Blackstone Group) and David McCormick (president of Bridgewater Associates) were all on the short-list of Washington outsiders who met with Trump over the weekend, strengthening the view that the President-elect will surround himself with seasoned market veterans rather than Washington insiders, in efforts to achieve his promised economic growth.  Bond prices bounced higher today, pushing Treasury yields/swap rates down 1-3 bps across the curve, with the 10-year yield ending near 2.335% still about 50 basis points above pre-election yield levels. 

Weighing in on the prospect of Trump’s fiscal policies’ impact on the economy, Fed Vice Chair Stanley Fischer presented his pro-productivity outlook that included “Some combination of improved public infrastructure, better education, more encouragement for private investment, and more effective regulation, all likely have a role to play in promoting faster growth of productivity and living standards.”  He admitted that certain fiscal adjustments could serve as much needed support to help fill the void for years of accommodative monetary policy.  However, Fischer was outspoken when commenting on the possibility of a new administration scaling back Dodd-Frank laws, stating that we “can’t allow ourselves” to forget the most recent financial crisis and warned of “inviting further trouble” by doing so.  At next month’s final FOMC meeting of the year, the Fed remains on track to change the benchmark borrowing rate (+ 25 bps) for only the second time since the financial crisis began over 8 years ago.  


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