Daily Market Color

Risk Assets Regain Favor

Yesterday’s intraday reversal in US equity gains proved to be short-lived as stocks rallied back to new record highs today across the board, as corporate earnings continue to yield better than expected results.  The DJIA crossed over the 26,000 mark again today, but unlike yesterday, was able to close above that level for the first time (+1.3%), while the S&P 500 (+1%) and Nasdaq (+1.1%) similarly posted their largest gains in four months.  The projected benefits from the tax overhaul continue to drive equity valuations higher, adding to the positive sentiment being built amongst investors as companies such as Apple come forward to announce plans to add thousands of new US jobs in the coming years.

 

 

US Treasurys declined throughout the trading session, partially influenced by the increased expectation of a stopgap funding bill being passed by the end of this week to extend the government’s operations through February 16th.  Yields/swap rates climbed 2-5 bps on the day, bringing the 10-year note yield up to 2.58%.  The US dollar edged 0.2% higher against most major currencies, with the British pound an exception, gaining 0.5% against the dollar to a 1.5-year high.  In cryptocurrency markets, Bitcoin futures continued their wild wide, touching as low as $9,231 earlier today before recovering the majority of losses to its current level near $10,800 (still down over 20% for the week).

 

 

Industrial Production Rises During Chilly December

Data from the Federal Reserve reported industrial production increased 0.9% during December, exceeding expectations of +0.5%, albeit the prior month’s value was downwardly revised to a 0.1% decline.  Compared to a year earlier, industrial production rose 3.6% – the largest annual gain in seven years.  Much of the rise was driven by utility output surging 5.6% MoM, attributed to the unseasonably cold weather and increased heating demand in the Northeast during December.  Manufacturing output climbed for a fourth consecutive month, up 0.1% (+0.3% e), as a surge in vehicle production (+2%) outweighed a 0.1% drop in the production of nondurable goods.  Also detailed in the report, capacity utilization, a measure of current vs. potential output at plants, edged 0.5% higher to 77.9% — its highest level in 3 years.

 

 

Canada’s Cautious Rate Hike

Today the Bank of Canada became the first major central bank to hike its benchmark rate in 2018. Canada’s 3rd quarter-point rate increase since July 2017 brings Canada’s main interest rate benchmark, the Overnight Lending Rate, to 1.25%. The decision was supported by recently released economic data, which placed the nation’s unemployment rate at a record low of 5.7% and annual inflation above the target level of 2%.  The move by the Canadian central bank was widely expected by financial markets, however the statement released afterwards augured a cautious outlook with respect to NAFTA negotiations.  “Recent data have been strong, inflation is close to target and the economy is operating roughly at capacity,” the text stated, “however, the uncertainty surrounding the future of NAFTA is clouding the economic outlook.”

 

Ready to start a conversation?

We offer free consultations and platform demos.

Let's Talk