Daily Market Color

U.S. Markets Mixed Ahead of FOMC Meeting

With little substantive economic data to be released today, US markets opened firmer but are generally mixed as investors await the latest rate decision by the Federal Reserve to be announced on Wednesday.  The NAHB Housing Index was the sole data update for today’s session, reported at a level of 65, well above expectations of 60, signifying a healthy housing market that will be further clarified tomorrow with the release of housing starts for August and this Thursday with the release of existing home sales.  While the odds of a Fed rate hike this week have moved to under 20%, the comments made by Janet Yellen after the statement is released, will be closely scrutinized to extract any hint of movement during the two remaining FOMC meetings in 2016.  Statistics in the labor and housing markets have been strong over the past few months, and investors will be looking for the Fed president to provide more detail as to the requirements for a rate increase vs. the generic “data-dependent” guidance provided to date.

Oil prices climbed today after conflict arose on Sunday at Libyan export terminal Ras Lanuf, a location that was expected to be functional this week for the first time since 2014.  The news of Libya adding to the supply glut had worried investors last week, but Sunday’s clashes between local and military forces have reminded the market that the flow of crude from Libya is still likely to be uneven.  In addition to the Libya clash, Venezuelan President Nicolas Maduro announced early Monday that an agreement to stabilize production and steady oil prices amongst both OPEC and non-OPEC members was close.  With an informal meeting between OPEC members scheduled for next week, Maduro hopes for a deal to be struck by the end of September.

The gain in energy markets helped push European equities higher Monday, where the primary indexes rose more than 1%.   In Asia, major markets were closed for holiday while the focus remains on the Bank of Japan’s meeting this week, where uncertainty remains surrounding the actions to be taken.  Negative interest rates and large scale asset purchases instated by the BoJ in the past have not generated the growth intended, leaving Japan’s policymakers in an interesting predicament going forward. With the meeting beginning tomorrow, investors seek a well-defined plan from the committee to be announced Wednesday once Asian markets close.

All three major U.S. stock indexes are trading near flat on the day, while Treasury yields and swap rates are relatively unchanged across the curve, with the 10-year Treasury yield at 1.68%.  WTI and Brent crude prices have come down a bit after being up over 2% early in the day and now sit at $43.30/barrel and $46.10/barrel, respectively.  

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