Daily Market Color

Quiet Start to the Week in Financial Markets

Both equity and bond markets held within tight ranges during today’s trading session.  The S&P 500 (+0.1%) and Nasdaq (+0.25%) edged higher to new record highs while the DJIA (-0.1%) posted a slight decline in advance of the first wave of key yearend corporate earnings releases set for later this week.  Treasurys are poised to finished the day near unchanged, with the yield on the 10-year note just above 2.48%.  The US dollar experienced its best performance in more than three weeks, rising 0.3% against major currencies.  In commodities, WTI crude climbed 0.4% to $61.70/barrel, while gold future declined 0.2% on the day.



Latest Government Shutdown Deadline Looming

A compromise on the government spending bill stands as the most pressing hurdle for Congress over the next 11 days.  The prior temporary budget extension is set to expire on January 19th, which puts pressure on the Republicans and Democrats to reach an agreement on a deal this week, with final voting to follow next week.  Budgeting for a wall along the southern border of the US and the immigration status of the portion of population labeled “Dreamers” represent two of the most controversial topics which could impact the budget negotiation process.   



Another Dovish Fed Member

Atlanta Fed President Raphael Bostic joined the likes of Philly Fed President Patrick Harker during a speech earlier today in which he announced his support of two or fewer interest rate hikes during 2018 – compared to the median three hikes projected by the FOMC after the December meeting.  Citing the issues of weak wage growth and tepid inflation, Bostic estimated that the “neutral” rate of interest may be closer to 2%, as opposed to the 2.5%-3.0% depicted in the Fed Dot Plot pictured below.  He went on further to express his concern that the public may be losing confidence in the Fed’s ability to spur the economy to reach the 2% inflation target, providing further support for a “slow removal” of fiscal stimulus.



Consumer price data for December is set to be released on Friday morning and will be closely monitored by financial markets.  Median forecasts currently call for a seasonally adjusted 0.1% headline inflation growth MoM (+0.2% core) and a 2.1% annual increase for December (+1.7% core). 


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