Daily Market Color

Treasurys Close Out Year with Extended Rally While Stocks Fade

Treasurys Rise as Stocks Fall in Final Trading Day of the Year  US Treasurys extended their rally to three days in today’s shortened final trading session of the year, as yield/swap rates decreased 1-5 bps across the curve, leaving the yield on the 10-year note just above 2.44% to close out the year.  Volumes again were at low levels as many investors had already started the holiday weekend.  All three major US stock indices finished down 0.25%-1% on the day, leaving the S&P 500 up over 9%, Nasdaq up nearly 8%, and DJIA up almost 14% for 2016.  Prices of crude oil remained relatively unchanged on the day, with WTI crude at $53.65/barrel and Brent crude at $56.75/barrel.    

A high level look back at the year displays two contrasting trends in the US markets.  The first half of 2016 was remarkable for the bond market rallying / interest rates hitting record lows, while equities got off to the worst-ever start to a year, and oil prices traded near 13-year lows.  Fast forward to the latter part of the year, and the yield on the 10-year Treasury note has surged more than 100 basis points since July, all three major US stock indices are finishing at or near record highs, and WTI crude oil has recovered to finish up 45% for the year.   
British Stocks End Year With Record Highs
Abroad, the U.K.’s benchmark index, FTSE 100, finished the year at a record high after gaining 0.3% on the day.  The index ended 2016 up a total of 14%, representing one of the best performers in European markets this year.  The increase in British stock values was largely attributable to the depreciating pound, surging commodities and bargain hunting post-Brexit.  European stocks on the whole, however, did not fare as well.  Concerns of a slowdown in China started European equities on the wrong foot to begin the year, and stocks were never ever able to fully recover afterwards, with events such as Brexit and the US presidential election prompting further caution amongst European equity investors.

The European currency added some excitement to today’s session after algorithmic (algo) -trading spurred a 1.6% increase in the euro within a matter of minutes.  During that time, the value of the euro jumped from $1.05 to $1.065 before retracing much of the gain shortly afterwards.  The Swiss franc tagged along for the ride, experiencing similar movements before also trading back near flat on the day. 
We wish everyone a great long weekend (global markets closed on Monday) and a very happy new year!

Ready to start a conversation?

We offer free consultations and platform demos.

Let's Talk