US Stocks Fluctuate with Corporate Earnings While Treasurys Fall, Dollar Rises on Steady Economic Data

Economic data released today was highlighted by durable goods orders for June, which displayed a robust headline figure of +6.5% MoM.  Increases in civilian aircraft orders (+131%) accounted for the majority of the rise in the Commerce Department’s report, however excluding transportation, orders rose a modest 0.2% (+0.4% expected).  Core capital goods orders fell 0.1% MoM (+0.3% expected), weighed down by weak levels of electrical equipment and computers orders.  Fortunately, much of softness in June’s core data was offset by upwards revisions to May’s figures.  Shipments of core capital goods, a direct input into the GDP figures to be released tomorrow, climbed 0.2% last month, indicating further expansion in business investment during the second quarter.  Other economic data on the day included initial jobless claims for the week ended July 22nd, which showed a 10,000 increase to a seasonally adjusted 244,000 in new claims, matching the four-week moving average of claims.  Also displayed in the Labor Department’s report, the number of continuing claims fell by 13,000 for the week ended July 15th.  Both figures remain well within the threshold associated with a healthy labor market.

 

 

Treasurys staged a modest selloff throughout the day, and the yield on the 10-year note is currently up 3bps to over 2.31%.  US stocks rallied early in the session after another wave of robust corporate earnings featuring Facebook and Verizon, before reversing course this afternoon.  The steepest losses were recorded in the technology sector, which contributed to the 0.6% drop in the Nasdaq for the session.  The US dollar finished 0.4% higher against major currencies today, recovering from yesterday’s multi-year low against the euro amidst the recent political uncertainty.  Monday’s news out of Saudi Arabia projecting decreased crude exports for August, along with reduced crude stockpiles in the US continues to drive oil prices higher, as WTI futures climbed above $49/barrel today for the first time in two months.  Also helping to temper oversupply concerns, yesterday Kuwait announced its intention to apply further cuts to its production and has already agreed with its US customers on reduced 2017 sales volumes.

 

 

In regulatory news, this morning the UK Financial Conduct Authority announced its plans to phase out the LIBOR benchmark rate by the end of 2021.  Regulators have sought a replacement for LIBOR for quite some time now as the result of past rigging scandals and an overall lack of transactional data to support its levels.  The actual process for phasing out the benchmark rate which has been utilized for the past 50 years is not fully mapped out yet, as currently more than $350 trillion in securities are based off of LIBOR and could be dramatically impacted by the transition depending on the established route.