Daily Market Color February 13, 2018Volatility Eases, Stocks Rebound Ahead of Inflation Data Stocks Rise for Second Consecutive Day Equity investors returned from the weekend with a bullish outlook, as US stocks went on to post their largest two-day advance in the past year and a half. Gains in share prices were broad-based, as all 11 major sectors in the S&P 500 rose and further distanced themselves from the lows experienced last Friday when the index touched below a key technical level — the 200-day moving average. The CBOE Volatility Index (VIX) aptly declined with the movement in equities that was devoid of the wild swings between positive and negative that characterized last week’s trading. The VIX finished 3.5 points lower on the day to 25.6 – its lowest level since the release of the January payroll data, which has been viewed as a potential catalyst for the recent volatility. Tomorrow morning financial markets will be keenly focused on the inflation data reported for last month, where a nominal 0.1% MoM rise in headline CPI and 0.3% increase in core CPI is expected. US Treasurys held within a relatively tight range throughout the day, with yields/swap rates rising 1-2 bps across the curve. The 10-year note yield is currently trading near 2.86% after rising as high as 2.89% earlier in the session. In commodities, crude oil futures stemmed a streak of six straight days of losses. WTI crude climbed 0.2% to $59.40/barrel, a welcomed start to the week after posting its worst five-day performance in the past two years last week. Trump Presents His Goals for the Budget In what is widely viewed to be little more than a formality, today President Trump proposed his $4.4 trillion budget plan to Congress. Highlights of the proposal included sweeping cuts to domestic entitlement programs and dramatic increases to military and immigration spending. Breaking down the $4.4 trillion budget, $716 billion would be allotted to military spending, $200 billion for national infrastructure and $23 billion for border security (mainly the wall along the Mexican border). Over the course of the next decade, entitlement programs such as Medicare and Medicaid would experience a $1.7 trillion reduction in funds, which the Trump administration has explained would not affect recipients as the programs would be made more efficient. Overall, the proposed budget would not eliminate the federal budget over 10 years – failing to achieve the GOP’s longstanding goal.