Daily Market Color

Risk-Off Heading into Holiday


Market Recap

In limited trading ahead of the Independence Day Holiday, all three major equity indices posted losses as trade disputes continue to drive geopolitical uncertainty.  Tech shares took the biggest hit, largely attributed to Micron Technology’s chips being temporarily banned for sale in China, pushing Nasdaq 0.86% lower on the day. The DJIA (-0.54%) was weighed down by shares of Caterpillar and Apple which continue to be impacted by trade concerns, while the S&P 500 declined 0.49%.  In rates markets, Treasurys rallied into the early close, as yields/swap rates fell by 2-5 bps across the curve, with the 10-year note closing at a yield of 2.83%.  In foreign exchange markets, the US dollar (USD) fell 0.2% vs the euro (EUR) and 0.1% vs the pound (GBP).  Oil futures had a wild ride today, initially rising above $75.00/barrel before reversing course after the announcement of planned increases to production in Saudi Arabia and settled 0.2% lower to $73.80/barrel.



US Factory Activity Strengthens

Factory orders for US manufactured goods rose 0.4% in May, exceeding expectations of zero growth.  In addition, factory orders for the month of April were revised upward from -0.8% to -0.4%.   The detailed report showed that orders for machinery increased 1.2% in May after an increase of 1.7% in April.  Furthermore, orders for motor vehicles rose 0.3% after being up 0.8% in the prior month.  Aircraft orders continued to struggle, falling 7% in May, albeit a significant improvement from April’s 30% decline.



What to Look for this Week

Looking ahead to the remainder of this week, there is no shortage of upcoming key economic releases and events, beginning Thursday afternoon with the minutes from the FOMC’s June meeting.  Financial markets will certainly be paying attention to comments about the Fed’s recent shift in expectations from 1 to 2 future rate hikes in the balance of 2018, which would place the target range at 2.25%-2.50% come year end.  From there, more clarity will be sought on the “neutral” Fed Funds rate, i.e. the short-term rate which has neither positive or negative effects on the economy.  Current estimates from market pundits range from 2.50%-3.00%.  On Friday, the Labor Department will release its comprehensive monthly employment report, where median forecasts point to a 195,000 seasonally-adjusted nonfarm payroll addition and a 3.8% unemployment rate.


Ready to start a conversation?

We offer free consultations and platform demos.

Let's Talk