Daily Market Color

Rates Fall as October’s Retail Sales Miss Expectations

Weak economic data pushed equities and rates lower on Tuesday
Equities retreated from record highs after October’s poor retail sales figure overshadowed Monday’s vaccine announcement.  October’s sales grew a mere 0.3% after rising 1.6% last month, hinting the pace of the US economic recovery could be slowing.  Rising virus cases also contributed to the risk-off move after Ohio, Illinois, and Pennsylvania announced new COVID-19 restrictions.  Major indexes closed lower — the S&P 500 and DJIA fell 0.5% and 0.6% respectively.  Treasury yields and swap rates fell across the curve — the spread between the 2y and 10-year narrowed to 69 bps at the close.  UST yields are relatively unchanged this morning.
Fed Chair Powell pushes Congress to approve another stimulus package
During his speech on Tuesday, Fed Chair Jerome Powell said the current rapid spread of COVID-19 is “the near-term risk that we’re most focused on.”  He worked to address concerns that the Fed is not well suited to control the effects of the pandemic.  Powell said the central bank still has monetary policy tools as its disposal and “will be strongly committed to using all of our tools to support the economy for as long as it takes until the job is well and truly done.”  Because he expects the economy will require more support from both the central bank and Congress, it is likely that the Fed will vote in its next policy meeting to either extend the deadlines of the emergency lending programs started during the early stages of the pandemic past December 31st or to expand its monthly asset purchases.  In the meantime, Powell said the Fed has “greatly increased our interactions” with Congress to continue advocating for another spending bill. 
Housing starts rose to 1.53 million in October
The level grew dramatically from September’s level of 1.459 million.  Permits were unchanged from last month’s figure at 1.545 million.  The report added, “Single-family housing starts in October were at a rate of 1,179,000; this is 6.4 percent (±8.7 percent)* above the revised September figure of 1,108,000. The October rate for units in buildings with five units or more was 334,000.”  The housing market has experienced tremendous growth the past few months and has been a bright spot in the economy throughout the pandemic.

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