Market Insights 7/17/2019

U.S. equities finished lower, as investors mulled a number of earnings results and economic data.

Treasury yields and the U.S. dollar were lower, and crude oil prices lost ground, while gold finished higher.

The Dow Jones Industrial Average declined 116 points (0.4%) to 27,220

The S&P 500 Index was 20 points (0.7%) lower at 2,984

The Nasdaq Composite lost 38 points (0.5%) to 8,185

In light volume, 702 million shares were traded on the NYSE and 1.8 billion shares changed hands on the Nasdaq

WTI crude oil fell $0.84 to $56.78 per barrel and wholesale gasoline was down $0.01 at $1.88 per gallon

The Bloomberg gold spot price jumped $19.59 to $1,425.82 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.2% lower at 97.22

Housing construction activity misses forecasts, mortgage applications dip

Housing starts for June declined 0.9% month-over-month to an annual pace of 1,253,000 units, below the Bloomberg forecast of 1,260,000 units. May starts were revised lower to an annual pace of 1,265,000. Construction for single-unit homes rose solidly m/m but starts for multi-unit structures dropped noticeably. Building permits, one of the leading indicators tracked by the Conference Board as it is a gauge of future construction, dropped 6.1% m/m to an annual rate of 1,220,000, versus expectations of a 1,300,000 pace, and compared to May’s upwardly-revised 1,299,000 rate. This was the lowest level for building permits in two years as authorizations for single-unit houses nudged higher m/m, though permits for structures of 5 units or more fell sharply.

The MBA Mortgage Application Index decreased 1.1% last week, following the prior week’s 2.4% decline. The dip came as a 1.5% gain in the Refinance Index was more than offset by a 3.8% drop for the Purchase Index. The average 30-year mortgage rate rose 8 basis points (bps) to 4.12%.

In afternoon action, the Federal Reserve delivered its Beige Book—an anecdotal look at business activity across the nation used by Fed policymakers to prepare for the next two-day monetary policy meeting set to end July 31st. The survey indicated that the economy expanded at a modest pace during the mid-May to early-July period, with retail sales up slightly and manufacturing flat. Most respondents felt mostly positive about the economic outlook, despite “widespread concerns about the possible negative impact of trade-related uncertainty.” Regarding inflation, the report showed that most districts deemed price increases as “stable to down”, while also noting that they were unable to pass along higher input prices to their customers as the marketplace competition remained “brisk”.

Treasuries were higher, as the yield on the 2-year note fell 3 bps to 1.83%, while the yields on the 10-year note and the 30-year bond decreased 7 bps to 2.05% and 2.57%, respectively.

Tomorrow’s economic calendar will included weekly initial jobless claims, forecasted to have increased 7,000 to a level of 216,000 as well as the Philly Fed Manufacturing Activity Index, expected to rise to a level of 5.0 for July from the 0.3 posted in June, with a reading above zero indicating expansion in activity, while the Index of Leading Economic Indicators (LEI) will round out the day, with economists projecting a 0.1% increase for June following the flat reading seen in May.

Europe mostly lower as earnings pour in and trade concerns flare up, Asia mixed

European equities were mostly lower, with the energy sector leading to the downside, and as investors digested some mixed earnings reports. Trade concerns also flared up after comments from U.S. President Donald Trump suggested the U.S. and China have a long way to go to reach a deal, while economic data was on the softer side.

European Union new car registrations fell in June and Eurozone construction output dipped in May, while U.K. inflation statistics came in roughly in line with expectations for June.

The euro and British pound ticked higher versus the U.S. dollar and bond yields in the region saw some pressure.

Stocks in Asia finished mixed as the markets digest earnings season, while U.S.-China trade uncertainty resurfaced after U.S. President Donald Trump said the two nations have a long way to go on trade. Mainland Chinese equities and those traded in Hong Kong dipped, while Japanese securities also traded lower, with the yen modestly trimming yesterday drop. Stocks in South Korea fell amid some weakness in the chip sector, while Australian listings gained ground, with consumer staples, financials and materials all moving to the upside.