Daily Market Color

Risk-On Trading Eases as Tax Reform Hype Fades

Jeff Davenport

Euphoria from Trump Tax Plan Settles – Yesterday’s selloff in Treasurys eased during today’s trading session as the risk-on sentiment generated from the newly released tax reform framework began to fade.  Yields/swap rates initially rose to begin the day, but are currently 1-3 bps lower across the curve, with the 10-year note yield trading near 2.31%.  All three major stock indices edged marginally higher, led by gains in the healthcare sector.  The US dollar slid 0.2% against major currencies, highlighted by a 0.3% drop against the euro to $1.18/EUR.  In commodities, WTI shed 1% on the day to $51.50/barrel, falling from a five-month high after a report showed US output climbing 9% over the past 9 weeks.



Jobless Claims Feel Impact of Irma

The Labor Department’s report on initial jobless claims displayed escalated levels for a fourth consecutive week as the aftermath from Hurricane Irma prompted increases in both Florida and Georgia.  The number of new claims for the week ended September 23rd rose to a seasonally adjusted 272,000 (270,000 expected), with the full impact from the hurricanes relatively unknown given some states inability to process claims due to the storm.  Additionally, the four-week moving average of claims climbed by 9,000 to 277,750.



Other data on the day included the final reading of Q2 GDP, which was upwardly revised to 3.1% from the second estimate of 3%.  Consumer spending accounted for the majority of economic growth during the second quarter, boosted by the persistently robust labor market and low inflation levels.  Tomorrow will feature a key economic data release in the form of the Personal Income and Outlays report, where modest rises are expected in personal income and consumer spending during the month of August.  Also contained in the data will be the PCE Price Index, the Fed’s preferred measure of inflation, which on an annual basis has been soft during the first half of the year, with expectations pointing towards a 1.5% YoY rise in overall PCE and 1.4% increase in core during August.

Jeff Davenport

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