Daily Market Color

Rates Fall as Markets Keep Tabs on New Administration

New administration remains in focus for financial markets
As expected, within his first few days in office President Biden has already signed several executive orders targeting better virus containment and a faster vaccine rollout. Whether Biden will be able to convince Republicans to accept his broader $1.9 trillion package remains a serious question for markets. Major equity indices declined from record highs – the S&P 500 and DJIA closed 0.3% and 0.6% lower, respectively, while Treasury yields and swap rates fell across the curve – the 10-year UST yield closed 2 bps lower at 1.08%.
US manufacturing index rises to a 13-year high in January
Manufacturing PMI rose to 59.1 from 56.4 last month while the services index rose to 57.5 from 55.3.  Both levels above 50.0 indicate a growth in activity, which continues to be supported by an increase in export demand, production, and orders.
Sales of previously owned homes hit a 14-year high in December
The figure rose 0.7% from November to an annual rate of 6.76 million.  In total, existing home sales were up 5.6% from 2019, leaving only around a two-month supply of homes on the market at the end of December, which is a record low.
Dollar continues to fall under Biden administration
Greenback investors have been watching from the sidelines, keeping tabs on the first few moves from the Biden administration.  Overall, the dollar continues to trend downward, coming close to breaching the psychological 90.00 dollar index level, hitting 90.06 in the early morning US trading sessions.
Key events happening next week
The FOMC will hold its first two-day rate-setting meeting under the Biden administration next week.  On the economic data front, Q4 GDP and jobless claims will be released Thursday.  On Friday, December reports for personal income, consumer spending, and core inflation will be published.

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