Market Insights 3/13/2019

U.S. equities finished in the green, continuing to grind higher. Investors seemed to shrug off the uncertainty surrounding Brexit, with some key votes continuing later today and tomorrow after Prime Minister May’s exit plan decree was handily rejected yesterday.

Treasury yields and gold were higher, and the U.S. dollar was lower, while crude oil prices gained ground amid an unexpected drop in crude oil inventories.

The Markets..

The Dow Jones Industrial Average (DJIA) rose 148 points (0.6%) to 25,703

The S&P 500 Index increased 20 points (0.7%) to 2,811

The Nasdaq Composite gained 52 points (0.7%) to 7,643

In heavy volume, 960 million shares were traded on the NYSE and 2.3 billion shares changed hands on the Nasdaq

WTI crude oil rose $1.39 to $58.26 per barrel and wholesale gasoline was up $0.04 to $1.86 per gallon

The Bloomberg gold spot price gained $9.58 to $1,311.16 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.4% lower at 96.55

Durable goods orders mostly top forecasts, wholesale price inflation cooler than expected

January preliminary durable goods orders rose 0.4% month-over-month (m/m), compared to the Bloomberg estimate of a 0.4% decrease and December’s upwardly-revised 1.3% increase. Ex-transportation, orders dipped 0.1% m/m, versus forecasts of a 0.1% rise and compared to December’s favorably-revised 0.3% gain. Orders for non-defense capital goods excluding aircraft, considered a proxy for business spending, grew 0.8%, compared to projections of a 0.2% gain, and the prior month’s figure was revised upward to a 0.9% decrease from the initially reported 1.0% drop.

The Producer Price Index (PPI) showed prices at the wholesale level in February ticked 0.1% higher m/m, compared to forecasts of a 0.2% gain, and following January’s unrevised 0.1% dip. The core rate, which excludes food and energy, was also up 0.1% m/m, versus expectations of a 0.2% gain, and after January’s unadjusted 0.3% increase. Y/Y, the headline rate was 1.9% higher, matching projections and compared to January’s unrevised 2.0% rise. The core PPI rose 2.5% y/y last month, below estimates to match January’s unrevised 2.6% increase.

The MBA Mortgage Application Index moved 2.3% higher last week, following the prior week’s 2.5% decline. The increase came as a 0.2% dip in the Refinance Index was more than offset by a 4.3% jump for the Purchase Index. The average 30-year mortgage rate decreased 3 basis points (bps) to 4.64%.

Treasuries were mostly lower, as the yield on the 2-year note was flat at 2.45%, the yield on the 10-year note lost 1 bp to 2.61%, and the 30-year bond rate moved 2 bps lower to 3.01%. The U.S. dollar dipped to extend a recent pullback, with the British pound gaining solid ground amid a series of Brexit votes and as the markets grapple with mixed economic data amid the backdrop of the Fed being patient with monetary policy.

February’s inflation landscape will culminate tomorrow with the release of the Import Price Index, forecasted to have risen 0.3% m/m following January’s 0.5% decline. Weekly initial jobless claims are also on tap, expected to increase 2,000 to 225,000, and new home sales will round out the economic calendar, with economists projecting a 0.9% m/m fall during January to an annual rate of 620,000 units.

Europe higher following data, despite Brexit uncertainty, Asia lower

European equities finished higher, with the energy sector rising as crude oil prices are extending a recent advance, while the economic front showed Eurozone industrial production rose more than expected in January. The euro gained ground versus the U.S. dollar and bond yields in the region were mostly higher. Stocks were able to show some resiliency in the face of a solid gain in the British pound amid ramped-up U.K.

Brexit uncertainty on the heels of the defeat of Prime Minister Theresa May’s revised divorce plan yesterday in parliament. The loss sets up a string of votes today and tomorrow that could determine if the direction of the nation’s exit from the European Union (EU). One such vote that occurred after the European markets were closed rejected a “no deal” Brexit, paving the way for the increased possibility of a delay in the March 29 deadline.

Stocks in Asia finished mostly lower with the markets digesting some disappointing economic data in the region and U.K. Brexit uncertainty increased following the defeat of Prime Minister May’s revised divorce plan from the EU, which opened the door to more votes on how the plan proceeds from here.

Japanese equities declined, with the yen choppy and the nation reporting a much larger-than-expected drop in core machine orders—a gauge of capital spending—for January. Stocks in Australia dipped on the heels of a drop in the country’s consumer sentiment for this month. Meanwhile, markets in mainland China, Hong Kong and South Korea were also lower.