Daily Market Color April 17, 2018S&P Moves Above 50-Day Moving Average SF Fed’s Williams On Yield Curve John Williams the current President of the SF Fed was in Madrid on Tuesday and addressed the current shape of the yield curve. While Williams was aware of concern that the US yield curve could invert given its historically flat current position, he felt it was part an parcel to structural conditions present in the money markets today including an increase in T-Bill Issuance. “The flattening of the yield curve that we’ve seen is so far a normal part of the process, as the Fed is raising interest rates, long rates have gone up somewhat — but it’s totally normal that the yield curve gets flatter,” said Williams. Williams is a key figure at the Fed as he will replace William Dudley as President of the NY Fed in June when Dudley retires. Williams was positive regarding the strength of the economy and supported the continued gradual approach to raising short rates. He commented “my own forecast would be that interest rates are going to move up gradually, smoothly.” Housing Starts Beat Estimates For the month of March, housing starts rose 1.9% MoM to 1.319 million on an annualized basis, exceeding the expectation of 1.267 million. In addition, the prior month was revised upward by 59k from 1.236 million to 1.295 million. While single family home starts fell by 37k from 900k to 867k, multi family starts more than made up for that rising to 452k up 14.4% MoM. Despite home affordability remaining a challenge with both property values and borrowing costs rising at a rate that income levels have not been keeping pace with, this report seems to show that large purchases are no longer being sidelined. Regionally there was some disparity in the report as most of the increased starts were in the Midwest which was up 22.4%. The Northeast was also up 0.8%, while both the south and the west saw decreases in the number of new projects starting. Another Risk On Day Major US stock indices posted gains as the market continues to focus on corporate earnings, with the S&P pushing through its 50 day moving average. The NASDAQ led the way with a 1.74% gain, +1.07% for the S&P 500 and a DJIA gain of 0.87%. US Treasurys were mostly unchanged, as yields/swap rates were down 0-1bp across the curve. The 10-year note yield was also largely unchanged (down 1 bp) closing at a yield of 2.82%. The US Dollar was up against both the Euro (EUR) and the Pound (GBP), up 0.1% and 0.4% respectively. Crude oil futures rose today on signals that OPEC may continue to reduce output over an extended period of time, climbing to $66.46 – up 0.4%. Happy Tax Day As income tax returns are due today, it is fitting that many politicians are discussing tax policy and the tax reform law passed late last year. The law is expected to be a central issue in the upcoming midterm elections with Republicans expected to run on the benefits of the new law while the Democrats are hoping the impact of the law underwhelms the electorate. The Democrats need to pick up 23 seats to regain the majority in the House. According to an NBC News/Wall Street Journal poll release this week, only 27% of Americans view the tax overhaul as a good idea while 37% of Americans believe the tax overhaul was a bad idea. While Republicans have talked up the benefits of the new plan for the economy, the Democrats have argued that the tax cuts will add to budget deficits and could result in further cuts to social welfare programs like Medicaid, Medicaid and possibly Social Security.