Treasurys Edge Higher, Stocks Fall Despite Robust Economic Data

Labor and Trade Data Display Tepid Movements   Initial jobless claims and import price data highlighted today’s economic reporting.  Weekly filings for unemployment were reported at 247,000 , below expectations of 255,000 and remaining well below the 300,000 threshold for the 97th consecutive week.  The number of continuous claims fell by 29,000 in the final week of December, marking its first decline since early November.  The unemployment data provides further evidence of a healthy labor market that continues to see low turnover, increased wages, and steady hiring.

In a separate report, import prices recorded the largest rise in almost five years, increasing 1.8% YoY in the month of December.  The headline figure was on par with median forecasts and represented a strong rebound from November’s 0.1% YoY increase in prices.  Much of the movement could be attributed to rising energy costs, which featured petroleum products jumping 7.9% for the month.  Excluding petroleum, import prices fell 0.2% in December.

The data was not enough to spur equity markets into positive territory, however, with all three major US stock indices declining 0.25% – 0.50% on the day, as the bearish tone from foreign markets overnight after Trump’s news conference carried over to US markets.  A strong rally in Treasurys to begin the day faded throughout the rest of the session, with yields/swap rates finishing down 1-2 bps across the curve, bringing the yield on the 10-year note to 2.36% after approaching the 2.30% level earlier in the day.

Oil Continues Rally on Supply Cuts
Crude oil prices continued yesterday’s rally after Saudi Arabian Energy Minister Khalid al-Falih announced the reduction of his nation’s output to less than 10 million barrels per day, lower than the volume initially pledged in the broad supply-reduction pact.  The level is a 22-month low for Saudi Arabia, whose officials have publicly stated its country’s firm commitment to extending its output-curbing initiative.  More concrete details surrounding the actual implementation of the global supply cut will be confirmed at the oil monitoring meeting, which is set to take place later this month.  The principal uncertainty going forward with regard to global stockpiles stands to be the amount of production in the United States, which many analysts feel could offset the global production cut efforts from most of the rest of the oil-producing nations.  WTI crude added 1.5% on the day to $53/barrel while Brent crude increased 1.75% to $56/barrel, marking the largest two-day rally in six weeks.