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Stocks, U.S. Dollar Gain with Clinton Displaying Narrow Lead in Polls

With the US Presidential Election underway, the attention of global markets is intently focused on which candidate will be voted in to lead the world’s largest economy.  Today marks the culmination of months of antagonistic campaigning that led to one of the most scrutinized and publicized elections in history, whose outcome stands to generate decisively different effects on global nations depending on the victor.  Early polls display Hillary Clinton narrowly ahead of Donald Trump, prompting a rise in stocks, as the S&P 500 aims to post its largest two-day gain since June.  The US dollar, Mexican peso, and Canadian dollar similarly showed gains, with the peso hitting a two-month high, while the yen and euro declined as investors begin to factor in the increased likelihood of Clinton foreign policies.  US Treasury prices harmoniously fell with the expectation for a December rate hike in the event that Clinton prevails.  Probability of an increase in fed funds rate in 2016 touched as high as 82% throughout the course of the day.

Aside from the election, the Labor Department’s September JOLTS report was released today, presenting a marginal increase in the number of job openings from the previous month.  As an oft-quoted measure by Janet Yellen, monthly job openings tallied 5.49 million, in-line with expectations and just above the revised August reading of 5.45 million jobs.  Additionally, the number of new hires and layoffs/discharges decreased, signaling a trend of employers holding on to existing employees while unable to find ideal candidates for new roles.  The JOLTS data supports a consistently strong labor market required for a rate hike, however, Federal Reserve Bank of Chicago President Charles Evans expressed his concerns today about the inflationary portion of the Fed’s dual-mandate for raising rates.  “We’re close, we’re getting there, and if I had even more confidence about getting to 2 percent I’d feel better about monetary policy re-normalization. We’ll see how that goes,” stated Evans.

Abroad, export figures in China revealed the lowest reading in six months.  At $178.18 billion in October, Chinese exports fell 7.3% YoY, below expectations of a 6.0% decline.  While many economists predicted a boost in exports following a nine percent depreciation of the yuan since August 2015, sluggish global demand and unfriendly domestic economic policies have hindered sales abroad.  Chinese imports reported a more gradual decline of 1.4% as commodity demand remained strong in the country, a positive sign for domestic infrastructure investment that will play a critical role in the attempt to reach the expansion goal of 6.5% for the year.            

All three major U.S. stock indexes closed up 0.35%-0.55% for the day, while Treasury yields/swap rates are up 3-5 bps across the curve.  Crude oil prices fluctuated throughout the day over ongoing production-freeze concerns, but have settled near even on the day.

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