Treasury Yields Surge with Rate Hike Expectations

 

The momentum from yesterday’s hawkish hold by the Fed at its January policy meeting carried into today’s trading session, as Treasurys sold off from the onset and finished 2-10bps higher across the curve in a bear-steepening pattern.  The yield on the 10-year note is now near 2.79%, its highest mark since December 2013.  US stocks felt the weight of investors’ concerns over rising rates, as both the S&P 500 (-0.05%) and Nasdaq (-0.35%) finished lower on the day, while the DJIA managed a marginal gain (+0.15)%.  This evening all eyes will be on the tech sector, with Apple Inc., Alphabet Inc. and Amazon.com Inc. all set to report earnings.  In commodities, crude oil futures gained more than 1% on the day as a barrel of WTI traded near $65.45.  For those who have the stomach to remain in the cryptocurrency markets, Bitcoin is now trading at its lowest level of the year, finishing below $9,0000 to conclude the day.  

 

 

ISM Keeps Streak Going

Today’s release of the Institute for Supply Management’s index of factory activity showed a second consecutive month of robust US manufacturing activity during January.  The 59.1 level, which exceeded expectations of 58.6, displayed robust levels of new orders (near 10-year high) and production (7-year high).  A slowdown in employment represented the lone weakness in the report, where the statistic fell to an eight-month low of 54.2.  The overall ISM manufacturing index has now recorded a reading higher than 55 for eight consecutive months, resolutely holding well above the 50 point threshold associated with expansion.

 

 

Labor Department’s Opening Act

Other key economic data points released today included a report from the Labor Department which showed the number of initial jobless claims for the week ended January 27th declining 1,000 to a seasonally adjusted 230,000 (235,000 expected).  The four-week moving average of claims fell by 5,000 to 234,500.  Also detailed in the report, the number of continuing claims increased by 13,000 to 1.953 million for the week ended January 20th.

Tomorrow, financial markets will be keenly focused on the Labor Department’s monthly employment report, where median forecasts call for an additional 180,000 in nonfarm payrolls in January with the unemployment rate holding steady at 4.1%.