Daily Market Color

Stocks Rally as Global Economic Outlook Improves


Stocks rally on optimism over U.S.-China trade deal. The global economic outlook has improved in recent weeks on signs of tangible progress between the U.S. and China regarding the phase-one trade deal. China has agreed to cut import tariffs on a range of goods including consumer products, certain foods, and technology. This comes on the back of Beijing’s commitment to lower trade barriers and boost domestic demand. The phase-one deal is expected to be signed early next year. Optimism over a prospective trade deal propelled U.S. stocks to record highs last week, while U.S. treasury yields rose to six-week highs. The 10-year Treasury yield fell one basis point to 1.92%. 1m LIBOR rose 1.2 bps to a seven-week high of 1.7920% amid year-end funding pressures.



With no-deal Brexit concerns still looming, the pound fell for a fifth day against the dollar. The pound had surged shortly after Boris Johnson’s party won with an overwhelming majority vote on the December 12th election, but the gains were soon erased. Johnson claims that the U.K. will drop EU labor, environmental, financial, health, and safety standards, which incites worry from other countries still part of the EU. These concerns caused the pound to fall as much as 0.7% to $1.20905—its lowest level since December 2nd.



Durable goods orders plunge. The Commerce Department reported that orders for U.S. durable goods sank 2% in November, the sharpest decline since May, dragged down by weaker demand in the defense sector. Orders for defense aircraft and parts plummeted 72.7% in November. Excluding the defense sector, orders rose .8%. October’s orders were also revised lower to a .2% gain from a previously-reported .5% increase.


New home sales rise. Sales of new U.S homes rose 1.3% in November to an annual pace of 719,000, reflecting sustained momentum in the residential real estate market that is helping underpin U.S. economic growth. In the three months that ended in November, new home sales averaged a 720,000 annual pace, the strongest in 12 years.


The week ahead. The economic calendar is light for the remainder of the holiday-shortened week with the only remaining data releases this week being tomorrow’s Richmond Fed Manufacturing Index for December (exp 1, prev -1) and Thursday’s weekly jobless claims report (exp. 220K, prev 234K). U.S. financial markets will have an early close tomorrow at 2 pm EST to observe the Christmas holiday.


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