Daily Market Color

Political Turmoil Holds Down Risk Assets

Facebook Weighs on Tech Stocks

The ongoing debate over the degree to which Facebook and other social media companies need to protect its users’ information came to the forefront during today’s trading session, as investors assessed the social network’s lack of awareness of system manipulation leading up to the 2016 presidential campaign.  The current discussion centers around a personality-analysis app released in 2015 which attracted roughly 270,000 participants at the time and was ultimately granted access to the private information of nearly 50 million Facebook users.  The private data was then reported to have been forwarded on to a politically-centered data analysis firm with ties to President Trump’s campaign.  Several officials are now calling for Mark Zuckerberg to speak before lawmakers to clarify just how much the tech giant was aware of at the time and how it might avoid such potential data misuse in the future.  Shares of Facebook declined as much as 8.1% intraday – the largest daily drop since August 2015.



Looking at major US stock indices, the tech-heavy Nasdaq posted a loss of 1.85%, while the S&P 500 and DJIA each finished 1.4% lower for the session.  In addition to the tech anxiety, political drama in the White House continues to build around Special Counsel Robert Mueller’s investigation into Russia’s alleged manipulation of the US Presidential election.  This weekend President Trump went on the offensive, tweeting “Why does the Mueller team have 13 hardened Democrats, some big Crooked Hillary supporters, and Zero Republicans? Another Dem recently added…does anyone think this is fair? And yet, there is NO COLLUSION!”, leading several lawmakers to question whether Trump will attempt to have Mueller fired.  Separately, but adding to the Russia-centric news focus, this weekend Vladimir Putin secured a new six-year mandate as Russia’s president after commanding 77% of the public vote, making him the country’s longest serving ruler since Josef Stalin.  



FOMC Meeting to Commence

Tomorrow kicks off the Fed’s two-day policy meeting, with a ¼-point hike to the benchmark borrowing rate all but certain, as per Fed Fund futures trading.  Jerome Powell’s first press conference as Chair afterwards will garner lots of attention, as markets will pay close attention for any indication of the Fed’s pace of future rate hikes (new dot plot), expectation for inflation, or even a change to the Fed’s meeting structure.  It was previously speculated that Powell may pivot to hold pressers after every policy meeting (vs. quarterly currently), however bond market pundits believe that such a move may unintendedly signal a more aggressive path of rate hikes.  US Treasurys held within a tight range throughout the session today, with yields/swap rates fluctuating within a +/- 2bps range, while the US dollar declined 0.2% against major currencies.        


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