Stocks Rise to Record Levels, Treasurys Decline on Tax Reform Rhetoric, Eased Irma Concerns

Financial markets re-emphasized the risk-on sentiment throughout the trading session as the threat from Hurricane Irma continued to recede and estimated damage costs were revised lower.  The Trump administration’s plans for tax reform also captured headlines today, with Treasury Secretary Steven Mnuchin acknowledging the urgency for a pro-growth overhaul to get passed as he spoke at a conference in New York.  “The stock market has expectations that we are going to create significant growth. Which is what this president and this administration is focused on,” Mnuchin stated.  All three major US stock indices posted modest gains on the day, with much attention being cast on the Apple event which featured the introduction of new versions of its watch, TV box, and iPhone.  Treasurys sold off for a third consecutive trading session, as yields/swap rates gained 2-4 bps across the curve, bringing the yield on the 10-year note to a two-week high of 2.17%.  The US dollar edged higher against major currencies, up 0.1% for the day.          

 

 

The Labor Department’s JOLTS report highlighted an otherwise light day of economic releases.  Job openings during July tallied a record high of 6.17 million, outpacing expectations of 6.010 million and a 0.9% increase from June’s figure.  The number of hirings also rose during the month, up 1.3% to 5.5 million, albeit the gap between openings and hiring remains substantial at 669,000 as employers struggle to fill positions at a quick enough pace.  Several factors could have contributed to the mismatch, including a lack of skilled workers, unwillingness by job-seekers to relocate for open positions and lower-than desired salaries for the open positions.  Also detailed in the report, the quits rate, an often referenced measure of confidence in the jobs market, rose steadily to 2.2% in July, a 0.1% increase from the previous month.

 

 

Internationally, the United Nations Security Council unanimously approved new sanctions against North Korea as a result of the nation’s most recent nuclear missile test over Labor Day weekend.  The measures against Pyongyang are the toughest to date and center around the capping of crude oil and refined petroleum product imports.  Additionally, the sanctions impose an embargo on all textile exports and provides member states the ability to inspect North Korean cargo ships which are suspected of violating the restrictions.  Overall, the measures were a step back from the initial proposal of a complete oil ban and asset freezes targeting Kim Jong Un, but the council felt it necessary to water down the sanctions in order to gain the full support of China and Russia.