Stocks, Dollar Rise on Strong Data Ahead of Payrolls

We’re Going Streaking – The S&P 500 rose for an eighth consecutive trading session (+0.5%), its longest streak since 2013, as today’s robust economic data and progress towards tax reform added to investor optimism.  The DJIA (+0.4%) and Nasdaq(+0.7%) also posted steady gains, with shares in banks stocks leading the way, up 1.2% on the day.  Treasurys experienced a modest selloff, and yields/swap rates are currently trading 1-3 bps higher across the curve.  The US dollar rallied 0.6% against major currencies to its best levels in nearly three months, most notably with a 1% rise against the pound to $1.31/GBP.  In commodities, crude oil recovered a portion of this week’s decline, up more than 1% on the day after a meeting between King Salman bin Abdulaziz of Saudi Arabia and Vladimir Putin boosted energy markets’ hopes for an extension of the existing supply curbs.  WTI crude is currently trading at $50.75/barrel, and Brent crude is closing in on $57/barrel.

Trade, Manufacturing and Labor Data Impress

There was a narrowing of the US trade deficit in August as reflected in data released by the Commerce Department this morning.  The trade gap shrank 2.7% to $42.4 billion for the month, as exports rose 0.4% and imports fell 0.1%.  Goods exports recorded their largest bump since April 2015, with increased global demand for US goods while imports of industrial supplies and materials were at their lowest levels in nearly a year.  Highlighted in the report, the US-China trade deficit rose 4% to a two-year high of  $34.9 billion.  Factory order data for August was also released today and provided further support of a strengthening manufacturing sector in the US.  Overall factory orders rose 1.2% (+1.0% expected) in the month, reflecting a 2% increase in durable goods orders and 0.4% bump in non-durable goods orders.

Other key economic data on the day included the Labor Department’s initial jobless claims, which totaled a seasonally adjusted 260,000 (+265,000 estimated) for the week ended September 30th.  The reading was 9,000 below the previous week’s level as Florida, Texas and Puerto Rico continue to recover from the devastating hurricanes last month.  Overall, initial claims for unemployment have held below 300,000 for 135 consecutive weeks.  Also detailed in the report, the number of continuing claims inched higher by 2,000 to 1.938 million for the week ended September 23rd.             

To be Free or Not to be Free…

Internationally, tensions surrounding the Catalan pursuit of independence from Spain continues to drive a modest flight to safety in European financial markets.  Last night Catalan President Carles Puigdemont took to the television to announce his preference for mediated talks with the Spanish government in Madrid, while confirming that the results of Sunday’s referendum would be put into action in the near future.  Spanish Economy Minister Luis de Guindos took a contrarian stance this morning in an interview with Bloomberg in which he criticized the Catalan government for its illegal makeshift vote and labeled their intentions “insane”.  Yields on Spanish bonds have risen nearly 20 basis points through the first four days this week as these bonds are on pace for their largest sell-off in seven months.