Daily Market Color

Treasurys Tumble as Stocks Rise to Record Highs After Economic Data, Growth Outlook

Existing Home Sales Decline on Limited Supply  In a report from the National Association of Realtors today, the number of US existing home sales fell 2.8% during the month of December to a seasonally adjusted annual rate of 5.49 million units.  Median forecasts had projected a 5.52 million pace, but a combination of shrinking supply along with rising mortgage rates and home prices appear to have been more impactful than expected.  Broken down by region, home resales declined in the Northeast, West, and Midwest, but remained unchanged in the South.  The total number of homes on the market last month totaled 1.65 million, 10.8% less than November, and the lowest level since December 1999.  At the current pace of sales, it would take 3.6 months to deplete the entire stock of houses on the market, well below the 6 month supply level that is associated with healthy housing supply and demand.  

UK High Court Rules in Favor of Parliament on Brexit Approval
As expected, this morning the UK Supreme Court ruled that the government must acquire parliamentary approval before officially beginning Britain’s exit from the EU, a process that is projected to take nearly two years.  While investors will now have to wait and analyze requested amendments from the MP’s, Prime Minister Theresa May’s March target for triggering Article 50 remains largely intact.  Additionally, in a separate decision, the high court stated that support from the parliaments in Scotland, Wales and Northern Ireland need not be obtained in order to move forward, effectively avoiding further potential delays and political complications.  The British pound touched as low as $1.2438 following the announcement before recovering the majority of losses later in the session.

Trump Meets with Auto Execs
The CEO’s of General Motors, Ford, and Fiat Chrysler joined President Donald Trump for a meeting at the White House today, marking the first time since July 2011 that the nation’s big three automakers had a sit-down with a US President.  The creation of jobs within US borders through the building of new plants stood as one of the pillars of Trump’s campaign, as automakers were routinely criticized for moving employment out of the country to take advantage of cheaper production costs.  In the past Trump has gone as far as to say that a 35% tariff would be imposed on imported vehicles (stick).  In order to make manufacturing operations more attractive in the US, he has vowed to decrease regulations and taxes for those businesses willing to remain within the border (carrot).  Reactions to the meeting were positive, with Ford CEO Mark Fields telling reporters that “we’re very encouraged by the president and the economic policies that he’s forwarding,” and GM CEO Mary Barra acknowledging the “huge opportunity” at hand to “improve the environment, improve safety and improve the jobs creation.” 

All three major US stock indices are currently trading 0.7%-1.0% higher, representing the largest move in equities since the beginning of the year as the S&P 500 and Nasdaq hit record highs.  Treasurys sold off, paring much of yesterday’s gain with yields/swap rates increasing 4-8 bps across the curve.  The yield on the 10-year note is currently above 2.46% after climbing more than 6 bps on the day.  Crude oil traded marginally higher, with WTI crude up 0.75% to $53.15/barrel and Brent crude up 0.25% to $55.35/barrel.  Controversies over oil captured US headlines after Donald Trump took action in advancing the construction of the Keystone XL and Dakota Access pipelines as he announced that “we are going to renegotiate some of the terms, and if they like, we’ll see if we can get that pipeline built.”  


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