Stocks, Treasurys Edge Lower on Mixed Economic Data, House Approval of Healthcare Bill

Economic data released today reflected a mixed economic picture.  The international trade gap unexpectedly narrowed to $43.7 billion in March, as a 0.9% decrease in exports to $191 billion was more than offset by a 0.7% reduction in imports to $234.7 billion.  The largest export declines were recorded in industrial supplies, motor vehicles, and consumer goods.  In another report, nonfarm productivity fell at an annualized 0.6% pace during the first quarter of 2017, worse than the median forecasts of a 0.1% drop, as a lack of business investment on new equipment and a decline in labor skill hindered activity.  Year-on-year for Q1, productivity increased 2.4%.  Separately, the number of Americans filing for unemployment benefits for the first time dropped by 19,000 last week to a seasonally adjusted 238,000, while continuing claims fell to a 17-year low of 1.96 million for the week ended April 22.  The four-week average of initial claims rose slightly to 243,000, which was still over 10,000 lower than the trend a month prior.  A fourth report on the day showed factory orders marginally climbing 0.2% during March, down from a 1.2% rise in the previous month.  The figure was slightly below expectations and appeared much weaker when excluding transportation equipment (mainly aircrafts) at -0.3%. 

Continuing with yesterday’s post-FOMC meeting momentum, US Treasurys sold off from the beginning of the session, and yields/swap rates are currently up 1-4 bps across the curve.  The yield on the 10-year note moved above 2.35%, its highest level in nearly a month.  US stocks have hovered near even on the day, weighed down largely by energy stocks whose values suffered from a second day of steep declines in crude oil prices.  Both WTI and Brent crude futures are down close to 5% as supply concerns amid increased production in the US continue to make markets question the effectiveness of OPEC’s production cutting agreement.  Also declining for the second consecutive session were the prices of metals, which persist to be impacted by reports earlier this week that signaled a slowdown in Chinese demand.

On the US political front, the Trump administration narrowly passed a repeal of Obamacare through the House of Representatives this afternoon.  The next step for the American Health Care Act will be approval by the Senate, however it is almost certain that amendments to the bill must be made ahead of that vote.  As it currently stands, the new healthcare bill lacks CBO scoring and provides minimal details related to its impact on individuals with pre-existing conditions.  Another bill approved today was the Financial CHOICE Act, which was advanced by the House Financial Services Committee and serves to repeal major parts of the Dodd-Frank law.  A larger vote within the House of Representatives will be the next step as the Trump Administration begins to roll back some of the post-2008 financial crisis legislation. 
 
Abroad last night French presidential candidates Marine Le Pen and Emmanuel Macron competed in their final debate before this Sunday’s election.  The nearly three-hour debate was marked by personal attacks and aggressive claims from both sides of the floor, and was viewed by many observers as more of a “schoolyard brawl”.  When the dust settled, Macron was labeled as the winner of the debate via a snap survey afterwards, thus retaining his designation as the favorite heading into the weekend.  Financial markets have largely ruled out the potential for a Le Pen victory, with the spread between French and German 10-year bond yields approaching its lowest level in nearly a year.