Daily Market Color August 23, 2017Safe Haven Assets Climb After Threat of Government Shutdown Market sentiment was mostly negative during today’s trading session as the latest comments from President Trump regarding the plans to build a wall along the US-Mexico border overwhelmed the positive sentiment around the construction of a passable tax reform bill. Speaking to supporters in Phoenix yesterday afternoon, Trump declared “if we have to close down our government, we’re building that wall,” while calling Democratic lawmakers who opposed the plan “obstructionists”. With President Trump failing to gather enough support amongst lawmakers for the majority of his reforms thus far, last night’s “my way or the highway” rhetoric did little to improve the market’s faith that future policy implementations will meet with any greater success. Adding to the political tensions, today representatives from Mexico and Canada stated their intention to look beyond Trump’s threat last weekend to scrap NAFTA if key issues couldn’t be agreed upon, describing it as a negotiation tactic. Further clarity on the fate of NAFTA is expected after the next round of tri-party negotiations, which are scheduled for September 1st in Mexico City. US Treasurys reversed yesterday’s selloff and then some, with yields/swap rates declining 2-6 bps across the curve. The yield on the 10-year note is now near its lowest level in the past two months at 2.17%. Also reflecting the investor flight to safety, major stocks indices traded 0.3%-0.4% lower for the session while gold futures gained 0.4%. Crude oil prices rose 1.4% on the day after a report from the Energy Information Administration showed crude stockpiles in the US declining for an eighth consecutive week. A 3.33 million barrel drawdown was recorded, bringing the supply to its lowest level since January 2016 at 463.2 million barrels. Today’s economic data releases were headlined by new home sales, which displayed a slowdown in the month of July, as reduced inventories continue to drive prices higher and temper the housing market. As reported by the Commerce Department, there was a 9.4% decline in the number of new homes sold last month, yielding a seasonally adjusted rate of 571,000 units — a seven-month low. The July figure fell significantly below expectations of 610,000, albeit the previous month’s level was revised 20,000 higher to a 630,000 pace. Compared to a year earlier, new homes sales were down 8.9%. Purchases were down in three of the four US regions, with the Midwest (+6.2%) recording the only gain. New homes available on the market increased slightly in July to 276,000 units, and the outstanding inventory equated to a 5.8-month supply.
