Treasurys Continue Rally, US Dollar and Stocks Fall After Mixed Economic Data

Labor, Trade Data Highlight Economic Reporting  The labor market continues to show strength as the weekly initial jobless claims reported today matched median forecasts of 265,000.  The decrease from the previous week’s 275,000 level marks the third reduction in the past four weeks and boasts the 95th straight week of sub-300,000 claims.  The four-week average of new claims, an oft-cited metric utilized to remove week-to-week noise from the data, similarly shifted down to 263,000.  The number of continuing claims jumped 63,000 to 2.1 million for the week-ended December 17th, matching the highest reading since September 10th.  Signaling the unreliability of reporting data during the holiday season, ten states’ claims had to be estimated, potentially leading to a sizable revision when the numbers get reported next week.      

In a separate report, initial estimates of the November US goods trade balance displayed a widening deficit as exports declined by $1.2 billion and imports rose by $2.2 billion over the course of the month.  The $65.3 billion total monthly trade deficit level was wider than the market consensus forecast of $61.6 billion, reminding market participants of the continued drag of trade on domestic economic growth.  Detailed in the release, food and vehicle exports experienced the sharpest decreases while imports of industrial supplies posted a sharp rise.  The full trade report for November is scheduled to be released on January 6th.

Treasurys Extend Rally While Stocks, Dollar Fade
The rally in Treasurys that began yesterday afternoon after the strong 5-year Treasury auction continued today, as yields declined an additional 2-6 basis points across the curve.  With trading volumes at less-than half the 30-day average, investors seem to have closed their books as the year draws to a close.  All three major US stock indices have been hovering near unchanged on the day, while the dollar pared its gains from yesterday, with the Bloomberg Dollar Spot Index falling 0.5% as the euro and Japanese yen both gained 0.4% against the greenback.  Crude oil prices experienced modest declines, shedding 0.3%-0.6% and falling for the first time in nine sessions.  With an early close set for tomorrow, we expect continued declining trading volumes heading into the last trading day of 2016.