Daily Market Color April 17, 2017Treasurys Hold Steady, Stocks Rally Influenced by Inflation, Retail Data US financial markets opened the week with a less cautious tone as stocks posted their largest gains in the past six weeks while Treasury trading was relatively muted. All three major US equity indices finished higher nearly 0.9% on the day, influenced by a perceived reduction in the odds for a June rate hike (~50% probability based on trading in Fed funds) following Friday’s weak economic data and continued geopolitical tensions. As reported by the Labor Department last week, the cost of living in the US unexpectedly declined during March. The headline consumer price index dropped 0.3% (no change expected) last month, its first decrease since February 2016, while core CPI fell for the first time in more than seven years, down 0.1% (+0.2% expected). Motor vehicles, apparel, and phone services highlighted some of the largest declines in prices. Similarly disappointing, retail sales in March declined 0.2% where no change was expected, as inclement weather and delays in tax refunds may have impacted consumer behavior more than expected. Today’s reaction to the data in bond markets was tempered, with the yield on the 10-year note finishing the session 1 bp higher to 2.25%. In commodities, gold futures touched a five-month high at $1,284/ounce while crude oil edged 0.1% lower to $52.65/barrel. Abroad, markets in Turkey rallied following Sunday’s referendum which tallied a favorable result for current President Recep Tayyip Erdogan. The controversial 51.2% “yes” vs. 48.8% “no” vote stands to grant the presidential office with centralized governing powers and places the nation in a position to see expedited regulatory overhaul in the future. Immediately following the news, the lira jumped nearly 3% against the dollar and Turkish equity markets climbed almost 1%. Elsewhere, today China announced stronger than expected growth in its economy during the first quarter of 2017. The 6.9% growth pace was supported by robust levels of infrastructure investment, industrial production, and retail sales, and represents the largest acceleration in the past year and a half. Equities in China declined on the day despite the positive data, as mounting tensions with North Korea threaten to disrupt financial markets.