Daily Market Color December 26, 2018Yes, We’re Back in Black Is This the End of the Correction? Today in financial markets we saw a swift reversal of the risk-off trading that dominated sentiment on Christmas Eve (and much of December): Equities: After teetering on the brink of a bear market on Christmas eve, U.S. equity markets roared back today as the DJIA registered its largest one-day point gain ever, surging more than 1080 points or 5%. The S&P 500 and NASDAQ also jumped 5% and 6%, respectively, the biggest one-day gain since March 2009. Consumer shares paced the rally with shares of Amazon.com soaring 9.5% after the internet retailer posted record holiday sales. Yields/Swap Rates: 5-9bps higher across the curve, with ten-year treasury yields jumping 7 bps to 2.81%. Crude: WTI futures surged 8.7% to $46.22/barrel* US Dollar: gained 0.45% against major currencies* *Rising from lowest levels of the past year and a half No End in Sight for Government Shutdown The partial government shutdown of the federal government entered a fifth day with little sign resolution before year-end. Yesterday, President Trump vowed to continue the shutdown until Congress approves funding for the border wall. “I can’t tell you when the government is going to reopen, I can tell you it’s not going to reopen until we have a wall, a fence, whatever they’d like to call it. I’ll call it whatever they want, but it’s all the same thing. It’s a barrier from people pouring into the country, from drugs… If you don’t have that (the wall), then we’re just not opening,” said President Trump. Trump Advisor says Powell is “100% safe.” While President Trump continues his attacks on the Fed, White House economic advisor Kevin Hassett sought to reassure investors that Fed Chair Jerome Powell’s job was secure. When asked by reporters to confirm that Powell’s job is not in jeopardy, Hassett stated “Yes, of course, 100% yes.” He also went on to endorse the good-standing of Treasury Secretary Steven Mnuchin, who was thrown into the fire after many questioned his contacting of the CEOs at major US banks and summoning the “Plunge Protection Team” on Monday. “I am highly confident that the president is very happy with Secretary Mnuchin,” Haslett said. Richmond Fed Survey Underscores Weakening Factory Sector The Richmond Fed’s manufacturing gauge fell sharply this month, as shipments and new orders weakened. The Richmond Fed said that its index, which measures factory activity across the mid-Atlantic region, fell to -8, well-below consensus estimates of +15. The 22 point drop from the prior month was the largest in the 25-year of the data series. It was the fourth of the regional Fed bank surveys this month to decline this month, providing further evidence that escalating tensions between the U.S. and its trading partners are proving to be a greater headwind for U.S. producers.
