Market Insights 9/19/2019

U.S. equities finished mixed after a choppy session, as investors weighed a host of monetary policy announcements released this week, the Fed’s intervention in the overnight lending markets for a third-straight day, and continued upbeat domestic economic data.

Treasury yields finished little changed and the U.S. dollar was slightly lower after existing home sales unexpectedly rose to its highest level since March 2018, jobless claims nudged higher and regional manufacturing activity remained in expansion territory and above forecasts.

Meanwhile, crude oil and gold prices rose.

The Markets…

The Dow Jones Industrial Average fell 52 points (0.2%) to 27,095

The S&P 500 Index was unchanged at 3,007

The Nasdaq Composite rose 6 points (0.1%) to 8,183

In moderate volume, 808 million shares were traded on the NYSE and 1.8 billion shares changed hands on the Nasdaq

WTI crude oil ticked $0.15 higher to $58.19 per barrel and wholesale gasoline gained $0.04 to $1.70 per gallon

The Bloomberg gold spot price increased $4.31 to $1,498.31 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—was down 0.2% at 98.34

Leading Indicators flat, existing home sales unexpectedly rise, jobless claims tick higher

The Conference Board’s Index of Leading Economic Indicators (LEI) for August was flat month-over-month versus the Bloomberg projection of a 0.1% dip and compared to July’s downward-revised 0.4% gain. Positive contributions from the building permits, credit and average workweek components of the index were offset by declines for ISM new orders, stock prices, jobless claims and the yield curve.

Existing-home sales rose 1.3% m/m in August to an annual rate of 5.49 million units—the highest since March 2018—compared to expectations of a decline to 5.38 million units from July’s unrevised 5.42 million rate. Sales of single-family homes were higher m/m and versus year-ago levels, while purchases of condominiums and co-ops rose m/m and were little changed y/y. The median existing-home price increased 4.7% from a year ago to $278,200, marking the 90th straight month of y/y gains.

National Association of Realtors Chief Economist Lawrence Yun said, “Buyers are finding it hard to resist the current rates, and the desire to take advantage of these promising conditions is leading more buyers to the market.” However, he cautioned that inventories remain low and are pushing up home prices.

Weekly initial jobless claims rose by 2,000 to 208,000, versus the Bloomberg estimate of 213,000, with the prior week’s figure being revised higher by 2,000 to 206,000. The four-week moving average dipped by 750 to 212,250, while continuing claims declined by 13,000 to 1,661,000, south of estimates of 1,672,000.

Treasuries finished nearly flat, as the yields on the 2-year note and the 30-year bond were unchanged at 1.75% and 2.24%, respectively, while the yield on the 10-year note ticked 1 basis point higher to 1.79%.

Stocks fell after a bumpy session and bond yields were flat after a recent surge, while the U.S. dollar saw pressure and crude oil prices gained modest ground after a wild week, with the global markets grappling with heightened geopolitical concerns and digesting a host of monetary policy decisions, headlined by yesterday’s 25 bp rate cut by the Federal Open Market Committee (FOMC).

Europe higher as financials and energy stocks gain ground, Asia mixed

European equities were higher, with financials gaining ground, along with bond yields in the region and as some of last week’s new stimulus measures from the European Central Bank started to kick in. The markets also digested unchanged monetary policy decisions from the Bank of England (BoE) and out of Switzerland, which followed today’s unchanged stance from the Bank of Japan and yesterday’s expected rate cut out of the U.S.

The BoE noted today that inflation may be cooler than expected amid festering uncertainty regarding the U.K.’s exit from the European Union, known as Brexit, as an October 31st deadline approaches, which could keep economic activity below potential and limit domestically-generated inflationary pressures.

The euro rose versus the U.S. dollar and the British pound nudged higher. In other economic news in the region, U.K. retail sales in August were a bit softer than anticipated. The energy sector is also gaining ground as crude oil prices are rising amid a wild week that has come courtesy of the attacks on Saudi Arabian oil facilities over the weekend.

Stocks in Asia finished mixed as the markets digested an expected rate cut out of the U.S. yesterday, which was followed by today’s Bank of Japan (BoJ) decision to keep its stance steady. Yesterday the Fed’s rate cut was met with some dissention, while the BoJ said today it is becoming necessary to pay closer attention to the possibility that the momentum toward achieving the price stability target will be lost. The BoJ added that it will reexamine economic and price developments at the next monetary policy meeting, when it updates the outlook for economic activity and prices.

Stocks in Japan gained ground, even as the yen recovered a bit from a recent slide, while emerging markets were volatile, with those traded in Hong Kong and India dropped sharply.

Mainland Chinese equities and shares in South Korea moved higher, while securities in Australia also advanced following some mixed August employment data.