Market Insights 9/11/2019

U.S. equities finished higher amid continued subdued U.S.-China trade tensions, while investors await tomorrow’s European Central Bank monetary policy decision and the Fed’s announcement next week.

Treasury yields were up in choppy action following a slightly higher-than-expected, but still-tame, read on U.S. wholesale price inflation, and the U.S. dollar gained ground, while crude oil prices turned sharply lower on news that President Trump was weighing easing sanctions on Iran, and gold finished in the green.

The Markets…

The Dow Jones Industrial Average rose 228 points (0.9%) to 27,137

The S&P 500 Index was 21 points higher (0.7%) at 3,001

The Nasdaq Composite advanced 86 points (1.1%) to 8,170

In moderate volume, 845 million shares were traded on the NYSE and 2.3 billion shares changed hands on the Nasdaq

WTI crude oil tumbled $1.65 to $55.75 per barrel and wholesale gasoline was down $0.02 at $1.57 per gallon

The Bloomberg gold spot price rose $10.33 to $1,496.11 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.3% higher at 98.63

Wholesale price inflation slightly hotter than expected, mortgage applications rise

The Producer Price Index (PPI) showed prices at the wholesale level in August ticked 0.1% higher month-over-month, above the Bloomberg forecast of a flat reading, and versus July’s unrevised 0.2% rise. The core rate, which excludes food and energy, rose 0.3% m/m, versus expectations calling for a 0.2% increase and compared to July’s unadjusted 0.1% dip. Y/Y, the headline rate was 1.8% higher, versus projections to match July’s 1.7% increase. The core PPI rose 2.3% y/y last month, north of estimates calling for a 2.2% increase, and compared to July’s unrevised 2.1% gain.

The MBA Mortgage Application Index rose 2.0% last week, following the prior week’s 3.1% drop. The increase came as a 0.4% rise in the Refinance Index was met with a 4.5% gain for the Purchase Index. The average 30-year mortgage rate dropped 5 basis points to 3.82%.

Treasuries were lower, as the yield on the 2-year note was up 2 bps at 1.68%, while the yields on the 10-year note and the 30-year bond were 4 bps higher at 1.74% and 2.22%, respectively.

Europe and Asia mostly higher as trade concerns remain in check

European equities were mostly higher, as the euro fell versus the U.S. dollar as the markets await tomorrow’s monetary policy decision from the ECB, with expectations of new stimulus measures elevated. Trade concerns, which have cooled a bit to help a recent rally in the global markets, remained subdued, with China announcing tariff exemptions and the nation set to resume talks with the U.S. early next month.

The British pound also trimmed a recent rally versus the greenback that had come from a series of parliamentary defeats for Prime Minister Boris Johnson that dampened no-deal Brexit worries, but Brexit uncertainty remains elevated after Johnson pledged to not request an extension ahead of the October 31st deadline. Bond yields were mixed after a recent recovery, but negative rates in key parts of in the region remain.

Stocks in Asia finished mostly higher, with U.S.-China trade concerns remaining relatively in check, with China offering tariff exemptions and the two largest world economies expected to resume trade talks early next month. Also, the markets are awaiting tomorrow’s monetary policy decision from the ECB in Europe and next week’s Fed decision out of the U.S., with expectations running high of additional stimulus measures.

Japanese equities advanced, with the yen extending losses, while markets in South Korea, Australia and India also gained ground. Chinese markets were mixed ahead of the release of some lending statistics after the closing bell, which showed August aggregate financing—a measure of total credit issued—and new yuan loans both came in stronger than expected.

Stocks in mainland China dipped, but those traded in Hong Kong jumped, bolstered by banks and developers amid speculation the government may announce measures related to land policy