Daily Market Color

Stocks, Yields Gap Lower Before Reversing Course Later in Session


Risk Assets on a Roller Coaster

Volatility ensued throughout today’s trading session as the S&P 500 and Nasdaq each declined more than 2% shortly after the open before paring the majority of losses in the afternoon.  The DJIA similarly sold off to begin the day and was down nearly 550 points at its lows in response to equity weakness out of China and Europe, along with weaker-than-expected earnings reports from Caterpillar Inc. (-7.56%) and 3M Co (-4.38%) this morning.  Losses for the day among the major indices were limited to around 0.5% after technical factors kicked in and other earnings releases such as McDonald’s helped to provide a much needed boost.



US Treasurys rallied early as stocks struggled.  Yields/swap rates were down more than 8bps across the curve before reversing course into the close.  The yield on the 10-year note touched its lowest level of the past three weeks as it crossed below 3.12% but settled back towards 3.17% in the afternoon.  The move back up in rates were also supported by Atlanta Federal Reserve President Raphael Bostic, who earlier today provided his view that the recent disruption in stock markets, pending trade wars, and other geopolitical uncertainties would not be enough to alter the US economy from its current robust growth path.  Bostic signaled that he is “more comfortable” now than he was in the past with the idea of hiking rates for a fourth time in 2018.  “Unless the data talk me out of it, I view a continued, gradual removal of policy accommodation as appropriate until we get to a neutral policy rate,” he explained.



Crude Crumbles

In commodity markets, crude oil extended yesterday’s decline as futures posted their largest daily loss in the past three months.  A barrel of WTI plummeted more than 4% to $66.45 as Saudi Energy Minister Khalid al-Falih reinforced his plans to increase Saudi production in the upcoming months.  Separately, tomorrow’s US inventory report from the EIA will serve as an important metric for crude prices.  US stockpiles have grown by more than 22 million barrels over the past four weeks, representing the largest build over such a time period since 2015.  



Turkey Blames Saudi Arabia

In the latest twist to the investigation surrounding the death of Saudi journalist Jamal Khashoggi, earlier today Turkey’s President Recep Tayyip Erdogan provided his first public comments on the matter and placed the blame directly on Saudi Arabia’s leadership.  Erdogan stated his belief that the murder was planned in advance and could not have been executed without the support of top officials in Riyadh.  President Trump referred to the actions of the Saudi government as “one of the worst in the history of coverups,” but maintained a wait-and-see attitude while the investigation continues on.  “I want to see the facts first. Saudi Arabia has been a really great ally, one of the biggest investors, maybe the biggest investor in our country”, Trump stated.    

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