Daily Market Color

Treasurys Surge with Trump Speech on Horizon While Housing Data Remains Robust

New home sales data highlighted today’s economic releases, reporting a slightly lower than expected rise during the month of January at a seasonally adjusted 555,000 level.  Median forecasts had called for a 571,000 pace, however flooding in California throughout the month hindered sales.  The overall figure represents a 3.7% rise from the previous month, led by a 15.8% increase in home sales in the Northeast region.  Another positive indication from the report was an increase in the stock of available homes, which displayed 5.7-month supply at January’s sales pace.  The number of new homes on the market in January was 265,000, up 3.5% from December and the highest total since July 2009.  In a separate report, the University of Michigan displayed a 96.3 (96.0 expected) reading for its consumer sentiment index in the month of February.  Breaking down the index, responses on both current conditions and inflation expectations remained steady, but optimism towards the jobs outlook slowed.              

Trading in the week’s final session was characterized by further uncertainty surrounding the implementation of the Trump administration’s pro-growth policies in anticipation of Trump’s speech to Congress next Tuesday.  Following yesterday’s comments from US Treasury Secretary Mnuchin in which he explained that the impact from new policy in 2017 would be muted, investor caution prevailed as demand for Treasurys rose from the onset of the session.  Treasury yields declined 2-7 bps across the curve in a bull flattening pattern as the yield on the 10-year note fell to 2.31%.  All three major US stock indices edged out modest gains for the day, finishing up 0.05%-0.15%, with the DJIA hitting a record high for the 11th consecutive session, its longest streak since 1987.  Retail shares paced gains after it was reported that the White House was not supportive of the proposed border tax plans presented by House Republicans which stood to hinder retailers’ bottom lines.  The US dollar posted a marginal 0.14% gain against major peers on the day, but finished down 0.36% for the week after dovish FOMC minutes weighed on the greenback.  Crude oil trade 0.75%-1.0% lower for the session, as WTI crude ended the week at $54/barrel and Brent crude finished near $56/barrel.         

Have a great weekend.

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