Daily Market Color

Senate Tax Proposal Scares Stocks

Senate Republicans rolled out details of their much anticipated tax bill today, outlining the plan to revamp both corporate and individual tax rates.  However, their version contained a number of notable differences from the House bill released last week.  One major difference was a delay in the reduction of the corporate tax rate from 2018 to 2019, which caused a flight to safety trading pattern with investors today.

 

 

All three major stock indices declined on the day, posting losses from 0.45% to 0.60%, with technology shares recording losses for the first time in the past 10 trading sessions.  The US Treasury yield curve steepened slightly from its flattest level in nearly a decade, with the two-year yield declining 1bp while the 10-year yield rose 2 bps to 2.34%.  The dollar declined against major currencies, falling 0.4% against both the euro and the Japanese yen.

 

 

Meanwhile in China…

While his administration was focused on helping push forward the tax reform efforts in the US, President Trump has been working to narrow the trade deficit with the world’s second largest economy.  Trump, alongside his Chinese counterpart, Xi Jinping, proudly announced a set of business deals valued over $250 billion between the two nations earlier this morning.  The trade agreements came forth following a speech from President Trump in which he labeled past trade practices between the US and China as “unfair” and  blamed “past administrations for allowing this out-of-control trade deficit to take place”.  Some of the new deals, while still tentative and not fully binding, include:
 
Energy: $84 billion – investment by China Energy Investment Corp. in shale gas development and chemical manufacturing projects located in West Virginia
Aviation: $37 billion – Boeing plane sales to China
Technology: $12 billion – American chipmaker Qualcomm sales to Chinese smartphone companies

 

 

Jobless Claims Back Near Historical Lows

A report from the Labor Department’s displayed the weekly initial jobless claims trending near a 44-year low, as the labor market disruption from the recent hurricanes continues to wane.  The number of new claims for the week ended November 4th increased to a seasonally adjusted 239,000 (232,000 expected), up 10,000 from the previous week’s revised level.  The four-week moving average of claims dropped by 1,250 to 231,250, well below the 300,000 threshold associated with a healthy labor market.  Also detailed in the report, the number of continuing claims rose by 17,000 to 1.901 million for the week ended October 28th.