Daily Market Color

Treasury Yields, US Dollar Higher Following Robust Manufacturing Data

US stocks were mixed while Treasury prices drifted lower in today’s shortened trading session which featured light but choppy activity ahead of tomorrow’s 4th of July holiday.  Both the DJIA (+0.61%) and S&P 500 (+0.23%) posted modest gains as the tech-heavy Nasdaq fell nearly a half percent.  Continuing last week’s trend, Treasury yields/swap rates gained 2-5 bps across the curve as the yield on the 10-year note rose near 2.35%.  Crude oil prices similarly followed last week’s trend, gaining roughly 1.5% and bringing WTI crude to $46.80/barrel and Brent crude to $49.40/barrel.  The US dollar reversed a portion of last week’s 1% fall, increasing 0.5% on the day against major currencies, highlighted by a 0.9% rise vs. the Japanese yen.  Prospects for US economic growth in the second quarter brightened following today’s release of the Institute for Supply Management’s (ISM) manufacturing index.  A reading of 57.8 was recorded for the month June, exceeding expectations of 55.3 and rising solidly from May’s 54.9 level.  Detailed in the ISM survey, the new orders index increased to 63.5 in June from 59.5 the previous month, and factory employment jumped to 57.2 from 53.5 in May.  A separate report today showed construction spending was unchanged during May (+0.5% expected), as a decrease in residential spending weighed on overall activity.  Other data releases of importance to markets later this week will be the FOMC minutes due out on Wednesday and June’s jobs report on Friday, where an increase of 170,000 in payrolls and an unemployment rate of 4.3% are expected.         

On the political front, a new House bill initiated by the Republicans was passed in the House last week covering government funding, included measures to lessen the impact of Dodd-Frank regulation. The bill has language to repeal the Volcker Rule, in addition to subjecting the CFPB to more stringent Congressional oversight. While the bill received support in the House, it is very unlikely to advance in the Senate due to significant opposition from the Democrats. It is anticipated that the Republicans will continue to work on alternatives to push through modifications to the existing regulations, however, they will continue to face challenges from their Democratic colleagues.

US financial markets are closed tomorrow, hope you have a good holiday.

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