Daily Market Color November 20, 2017Stocks Edge Higher as Tax Reform Talks on Hold, German Coalition Fails Tax Reform Talks Take a Break US financial markets opened the week in a relatively lackluster fashion as the recent spikes in volatility generated from news on tax reform progress were absent with Congress on holiday break this week. All three major US stock indices edged higher, with the S&P 500 up 0.3% after posting losses for two straight weeks for the first time since August. Treasurys sold off for a second straight session, as yields/swap rates rose 1-4 bps across the curve, pushing the yield on 10-year notes above 2.36%. In commodities, WTI crude oil futures declined 0.8% to $56/barrel, while gold recorded its biggest loss in two months, down 1.3% to $1,275/ounce. This week investors are looking forward to the release of the November 1st FOMC minutes, where the Fed’s views on future hikes will be carefully scrutinized, as inflation continues to struggle hitting the 2% target. Yellen to Step Down This afternoon Federal Reserve Chair Janet Yellen announced she would be stepping down from the Fed’s Board of Governors once replaced by Jerome Powell at the conclusion of her term in February. Yellen holds the option to serve on the Fed board until 2024, but opted to resign, as has been customary in such situations with the Fed chair’s departure in the past. Yellen’s tenure at the Fed dates back to the 1970’s, when she first joined as a staff economist. With the resignation, President Trump will have the opportunity to nominate his fourth member of the seven-person board of governors. Merkel’s Coalition Efforts Fail On Sunday, German Chancellor Angela Merkel begrudgingly announced that coalition talks between the Christian Democratic Union (CDU), liberal pro-business Free Democrats (FDP), and environmentalist Greens had broken down, effectively ending four weeks of discussions and casting doubt on Merkel’s future role at the helm of Europe’s largest economy. The FDP was ultimately the party that pulled out of the deal, citing a series of disagreements over the vision for the country, with immigration policy being a central point of dispute. The options remaining for Ms. Merkel are now limited – 1) Attempt to extend an alliance to include the Social Democratic Party which had previously refused to work with the CDU 2) Lead a minority government (has not been done postwar) 3) Hold snap elections. The euro traded lower immediately following the news of the coalition failure, and is currently down 0.5% against the dollar.