Daily Market Color

Stocks Rebound While Yields Continue to March Higher


Retailers Lead Stocks Higher     

US stocks bounced back from yesterday’s selloff despite Treasury yields remaining at multi-year highs and a heightened wave of geopolitical uncertainty building in North/South Korea.  Major indices were boosted by shares at retailers (+1.6%), notably Macy’s, whose stock price surged (+10.8%) following the reporting of better-than-expected quarterly earnings.  In bond markets, US Treasurys extended yesterday’s steep decline, as yields/swap rates climbed an additional 1-4bps across the curve, with the 2- and 10-year note yields rising to 2.58% (10-year high) and 3.095% (7-year high), respectively.  In the commodities sector, gold prices hovered near their lowest levels of the year at $1,290/ounce while WTI crude oil futures inched higher to $71.50/barrel.



Housing Starts Slump

The Commerce Department’s report on US homebuilding kicked off today’s economic data reporting.  Housing starts reversed the prior month’s 3.6% rise, as new-home construction in April fell by 3.7% to a 1.287 million annualized pace.  The multifamily sector accounted for much of the decline, where starts tumbled 11.3%, while single-family starts posted a skinny 0.1% MoM increase.  Also detailed in the report, building permits fell 1.8% to a 1.352 million pace.  Overall, last month’s homebuilding slowdown was largely associated with the recent rise in construction material and labor costs.



Industrial Production Remains Robust

Data from the Federal Reserve reported industrial production increased 0.7% during April, exceeding expectations of +0.6% and matching the prior month’s upwardly revised level.  Compared to a year earlier, industrial production rose 3.5%.  Strength in output was broad-based, including a 1.1% jump in mining and a 0.5% bump in manufacturing, both beating median forecasts.  Also reported in the release, capacity utilization, a measure of current vs. potential output at plants, edged 0.4% higher to 78.1% — near its highest level in more than 3 years.



Uncertainty in NAFTA Timing

Negotiations to revise the North American Free Trade Agreement prove to be taking longer than Republicans officials were hoping for, as tomorrow’s deadline to take advantage of the Congressional “fast track” legal measure rapidly approaches.  Leading up to this week, US, Mexico and Canada all seemed to be motivated to come to agreement on a “skinny” version of the deal by the deadline, however Mexico’s economy minister Ildefonso Guajardo informed reporters yesterday that he does not think it will get done by May 17th as originally hoped.  Without an agreement in place by tomorrow, formal approvals in the US would not be able to take place until the newly elected Congress takes office in 2019 – a further delay the Trump administration would certainly like to avoid.  The US dollar climbed an 0.15% against major currencies today to a new high for the year. 


Ready to start a conversation?

We offer free consultations and platform demos.

Let's Talk