Daily Market Color

Treasurys Rebound, Stocks Fluctuate Amid Strong Economic Data, Brexit Start

Pending home sales for February highlighted economic data releases today, and were reported at a 10-month high, which exceeded median forecasts and reflected a strong bounce back from a 2.8% decline in January.  The National Association of Realtors reported a 5.5% jump (+2.5% expected) in its Pending Home Sales Index last month, reaching a level of 112.3 for the first time since April 2016.  A bevy of factors were pointed to as reasons for the surge, including unseasonably warm temperatures, rising consumer confidence and buyer expectations for interest rates to rise in the upcoming months.  With 1-2 months representing the typical time span for a pending home sale to close, last month’s figures foreshadow a robust spring buying season.

Across the pond, British Prime Minister Theresa May triggered Article 50 of the Lisbon Treaty, officially starting the two-year clock on the UK’s separation from the European Union.  Nine months ago British citizens voted to leave Europe, and with today’s announcement, formal negotiations over the settlement of trade, currency and immigration rules with the 27 other European nations begin.  The British pound fluctuated throughout the day before closing 0.2% lower against the US dollar, as uncertainty looms over the possible economic impact of the separation along with yesterday’s announcement that Scotland would be seeking a second referendum. 

Treasurys rallied from the open of the trading session, reversing the bulk of yesterday’s selloff as yields/swaps rates decreased 2-4 bps across the curve.  The yield on the 10-year note declined 4 basis points to 2.38%, unaffected by Federal Reserve Bank of Boston President Eric Rosengren’s comments today advocating for four total rate hikes in 2017.  Major US stock indices were mixed on the day, with the DJIA shedding 0.2% while the S&P 500 (+0.1%) and Nasdaq (+0.4%) posted marginal gains.  Crude oil prices benefited from a lower than expected build in US stockpiles, as both WTI and Brent crude increased roughly 2% to $49.40/barrel and $52.30/barrel, respectively.   

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