Market Insights 1/17/2019

U.S. stocks extended a recent rally as equities shrugged off the persisting government shutdown, festering Brexit uncertainty and ongoing China concerns, aided by an upbeat jobless claims report and an unexpected jump in regional manufacturing activity.

Treasury yields finished mostly higher and the U.S. dollar was little changed, while gold and crude oil prices moved lower.

The Markets…

The Dow Jones Industrial Average gained 163 points (0.7%) to 24,370

The S&P 500 Index rose 20 points (0.8%) to 2,636

The Nasdaq Composite advanced 50 points (0.7%) to 7,084

In moderately-heavy volume, 914 million shares were traded on the NYSE and 2.1 billion shares changed hands on the Nasdaq

WTI crude oil lost $0.24 to $52.07 per barrel but wholesale gasoline ticked $0.01 higher to $1.43 per gallon

The Bloomberg gold spot price declined $1.59 to $1,292.08 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—was little changed at 96.07

Jobless claims move lower, regional manufacturing surprisingly jumps

Weekly initial jobless claims decreased by 3,000 to 213,000, below the Bloomberg estimate of 220,000, with the prior week’s figure unrevised at 216,000. The four-week moving average dipped by 1,000 to 220,750, while continuing claims increased by 18,000 to 1,737,000, north of estimates of 1,734,000.

The Philly Fed Manufacturing Index unexpectedly showed growth (a reading above zero) accelerated, rising to 17.0 from 9.4 in December, compared to estimates of a dip to 9.0.

Treasuries were mostly lower, with the yield on the 2-year note rising 3 basis points to 2.57% and the yield on the 10-year note gaining 2 bps to 2.75%, while the 30-year bond rate was flat at 3.07%.

The economic calendar will close out the week tomorrow with another dose of manufacturing data and a timely read on consumer sentiment. The Fed will deliver its industrial production and capacity utilization report, with production projected to rise 0.2% month-over-month in December, after November’s solid 0.6% gain, while capacity utilization is expected to remain at 78.5%. The report will be followed by the preliminary January University of Michigan Consumer Sentiment Index, anticipated to drop to 96.8 from December’s 98.3 level.

Europe mostly lower, Asia mixed on Brexit developments, trade and China uneasiness

European equities finished mostly lower, weighed down by uncertainty over Brexit after the U.K. government lost its bid to pass an original divorce plan in the House of Commons on Tuesday, but endured a no-confidence vote in Parliament yesterday. Markets seemed to be expecting Westminster to move for an extension of Article 50—pushing back the March 29 Brexit deadline—as the possibility of a general election or a no-deal scenario appeared to fade slightly.

The British pound moved higher and the euro dipped versus the U.S. dollar, while bond yields in the region were mostly higher.

Chinese stocks moved lower even as the People’s Bank of China injected $83 billion of liquidity into its banking system ahead of a traditionally tight period before the Chinese New Year.

Japanese stocks dipped, with the yen gaining some ground on the U.S. dollar and markets still digesting yesterday’s disappointing read for core machine orders ahead of tomorrow’s December inflation report.

Random Observations

Uncertainty surrounding Brexit, China trade negotiations, the Fed’s rate-tightening cycle and the government shutdown, combined with lowered Q4 2018 EPS growth estimates and forward guidance, haven’t served as much of a headwind to YTD equity returns.

Through January 15, S&P large-, mid- and small-cap benchmarks are each up more than 4%. In addition, 10 of 11 sectors in the S&P 500 were in positive territory, with the cyclical sectors outpacing the defensive ones. The early read on January Barometer has issued a “thumbs up” for the year, as investors unwind the negative sentiment that prevailed through late last year.

The S&P 500’s P/E on forward 12-month earnings had nose-dived to a shade above 14x, which rivaled the average next-12-month P/E average during the 10 corrections and pullbacks since 2009.

Market Insights 1/16/2019

U.S. equities continued their 2019 rally, led by financials, courtesy of better-than-expected results from Dow member Goldman Sachs and Bank of America. Also, Prime Minister Theresa May survived a no-confidence vote a day after her Brexit measure failed.

Treasury yields were mostly higher and the U.S. dollar was little changed, while gold gained ground and crude oil prices were amid a decline in oil inventories.

The Markets…

The Dow Jones Industrial Average rose 142 points (0.6%) to 24,207

The S&P 500 Index gained 6 points (0.2%) to 2,616

The Nasdaq Composite advanced 11 points (0.2%) to 7,035

In moderate volume, 862 million shares were traded on the NYSE and 2.1 billion shares changed hands on the Nasdaq

WTI crude oil inched $0.20 higher to $52.31 per barrel and wholesale gasoline added $0.01 to $1.42 per gallon

The Bloomberg gold spot price gained $3.49 to $1,293.00 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—was flat at 96.02

Housing index moves higher, mortgage applications increase

The National Association of Home Builders (NAHB) Housing Market Index showed homebuilder sentiment this month ascended to 58 from December’s unrevised 56 level, where it was expected to remain. A level of 50 separates good and poor conditions.

The MBA Mortgage Application Index rose 13.5%, following the prior week’s 23.5% gain. The increase came as an 18.7% rise in the Refinance Index combined with a 9.1% advance for the Purchase Index. The average 30-year mortgage rate remained flat at 4.74%.

In afternoon action, the Federal Reserve released its Beige Book—an anecdotal look at business activity across the nation—a policy tool used to prepare for the Central Bank’s next two-day meeting set to end on January 30th.

The report showed eight of the twelve Districts described economic growth as “moderate”, and that retail sales in most Districts also saw modest gains. However, “many” Districts indicated that some respondents had become less optimistic amid a myriad of worries, including increased market volatility, rising short-term interest rates, and elevated trade and political uncertainty.

With regards to inflation, most Districts said firms were realizing slightly higher input costs, and that the feeling was mixed as to whether those cost could be passed on to consumers.

Subdued inflation—price stability is part of the Fed’s dual mandate—likely has contributed to a more dovish Fed, and together with a retreat in the U.S. dollar, easing credit market strains and U.S.-China trade optimism, have helped the stock market’s rally in the wake of the Christmas Eve tumble.

Treasuries were mostly lower, as the yields on the 2-year and 10-year notes rose 1 basis point to 2.55% and 2.72%, respectively, while the 30-year bond rate was unchanged at 3.07%.

Europe and Asia mostly higher following failed Brexit vote

European equities were mostly higher, amid the continued rally in U.S. equities, and despite yesterday’s crushing Brexit vote failure, with Prime Minister Theresa May’s deal voted down by a margin of 432-202.

The size of the defeat led opposition leader Jeremy Corbyn to call for a no-confidence vote in the government today, of which May narrowly survived, with a tally of 325-306. Per an earlier Parliamentary vote, the British government has only three working days to present an alternative course of action. Some investors appeared to see the risk of a no-deal Brexit fading after the result, boosting confidence, although there is no clear path forward as the divorce deadline looms.

The euro lost ground versus the greenback, while bond yields in the region were mixed.

Stocks in Asia ended the session mostly higher, following Tuesday’s U.S. rally, with the markets pondering its next moves on the heels of yesterday’s failed Brexit vote. Shares in Hong Kong rose modestly, while those traded in mainland China finished flat, with sentiment appearing to be somewhat positive following signals from the People’s Bank of China that further stimulus policy measures, a move that could provide ample liquidity as it heads into the Lunar New Year holiday.

Market Insights 1/15/2019

U.S. stocks extended the rally that has accompanied 2019 after slipping the past couple sessions, with inflation remaining subdued, crude oil prices resuming a run.

Treasury yields and the U.S. dollar rose, while gold dipped.

The Markets…

The Dow Jones Industrial Average rose 156 points (0.7%) to 24,066

The S&P 500 Index gained 28 points (1.1%) to 2,610

The Nasdaq Composite advanced 118 points (1.7%) to 7,024

In moderate volume, 870 million shares were traded on the NYSE and 2.0 billion shares changed hands on the Nasdaq

WTI crude oil rallied $1.60 to $52.11 per barrel and wholesale gasoline was $0.05 higher at $1.41 per gallon

The Bloomberg gold spot price dipped $2.37 to $1,289.35 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—increased 0.3% to 95.93

Inflation remains subdued

The Producer Price Index (PPI) showed prices at the wholesale level in December nudged 0.2% lower month-over-month, compared to the Bloomberg forecast of a 0.1% decline, and following November’s unrevised 0.1% rise. The core rate, which excludes food and energy, was down 0.1% m/m, versus expectations of a 0.2% gain, and after November’s unadjusted 0.3% increase. Y/Y, the headline rate was 2.5% higher, matching projections and November’s unrevised gain. The core PPI rose 2.7% y/y last month, south of the estimated 2.9% increase and matching November’s unrevised gain.

Inflation and the Fed are likely to remain in focus tomorrow, with the economic calendar delivering the Import Price Index, expected to fall, as well as the Fed’s Beige Book—an anecdotal look at business activity across the nation—a policy tool used to prepare for the Central Bank’s next two-day meeting set to end on January 30th with a press conference by Chair Powell.

Treasuries mostly dipped, with the yield on the 2-year note little changed at 2.53%, the yield on the 10-year note ticking 1 basis point to 2.71%, and the 30-year bond rate moving 2 bps higher to 3.07%.

The government shutdown officially became the longest in history over the weekend as markets watch whether either political party will indicate that a quick deal to end it is near.

Europe mostly higher ahead of Brexit vote

European equities finished mostly higher, with the global markets eyeing slower German economic output data ahead of today’s controversial Brexit vote. Sentiment seemed to find support from comments out of China suggesting stepped-up stimulus measures to combat the slowing Chinese economy.

Germany announced that 2018 GDP slowed from a 2.2% pace in 2017 to an expansion of 1.5%, and was projected to further decelerate to a 1.0% increase in 2019. Banks were lower to keep Italian markets out of the green amid lingering liquidity fears.

The British pound and the euro lost ground versus the U.S. dollar and bond yields in the region were mostly lower.

After the markets closed, the fate of Prime Minister Theresa May’s Brexit agreement was voted on by the U.K. parliament and was defeated severely, with 432 members voting against and 202 voting for it. May faces a no-confidence vote tomorrow in the wake of the historic landslide loss and uncertainty is flaring up that it may lead to an early election or a new Brexit referendum. The British pound rallied on the heels of the vote and reversed to the upside versus the U.S. dollar.

Stocks in Asia finished higher with the markets hesitating a bit after the downside move in the U.S. yesterday and prior to today’s Brexit vote, as earnings season kicks into gear. Equities in mainland China and Hong Kong led the way as the People’s Bank of China signaled that the enactment of additional stimulus measures is near, helping to overcome dampened sentiment related to this week’s poor trade data.

Japanese markets gained ground, after yesterday’s market holiday, with the yen dropping late in the session. Gains were broad-based, with South Korean, Australian and Indian equities all posting solid gains.

Market Insights 1/14/2019

After posting three-straight weekly gains, U.S. equities took a bit of breather and finished lower.

Treasury yields were mixed and the U.S. dollar was slightly lower as the U.S. partial government shutdown entered its twenty-fourth day, making it the longest ever.

Crude oil prices lost ground, and gold was modestly higher.

The Markets…

The Dow Jones Industrial Average declined 86 points (0.4%) to 23,910

The S&P 500 Index shed 14 points (0.5%) to 2,583

The Nasdaq Composite fell 66 points (0.9%) to 6,906

In moderate volume, 892 million shares were traded on the NYSE and 1.9 billion shares changed hands on the Nasdaq

WTI crude oil lost $1.08 to $50.51 per barrel and wholesale gasoline was $0.04 lower at $1.36 per gallon

The Bloomberg gold spot price rose $1.68 to $1,291.93 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—inched 0.1% lower to 95.60

Treasuries mixed amid dormant docket

This week, a decline in prices at the wholesale level for December, while the core rate is estimated to have moved 0.2% higher m/m. The Empire Manufacturing Survey is also slated for release, anticipated to tick lower to 10.0 for January from last month’s 12.2 level, with a reading above zero denoting expansion in activity.

Treasuries were mixed amid a dormant economic calendar, with the yield on the 2-year note dipping by 1 basis point (bp) to 2.53%, while the yield on the 10-year note was flat at 2.70%, and the 30-year bond rate was up 2 bps to 3.05%.

The Fed will also release its Beige Book—an anecdotal look at business activity across the nation—a policy tool used to prepare for the Central Bank’s next two-day meeting set to end on January 30th with a press conference by Chair Powell.

Europe and Asia lower with weak Chinese trade data in focus

European equities were lower, as a significant contraction in Chinese export and import data seemed to stoke global growth fears, as the lower-than-expected Chinese trade data seemed to weigh on sentiment with uncertainty of whether the U.S./China trade conflict will come to a resolution or if it could further escalate.

Brexit continued to be in focus, with British lawmakers set to vote on a controversial divorce deal on Tuesday, as worries over the Northern Ireland backdrop continue to fester. Expectations seem to be that the vote will fail, leaving Prime Minister Theresa May’s future in question, as well as the orderliness of the entire Brexit process. Economic news in the region was light, with Eurozone industrial production falling more than expected.

Meanwhile, the euro was lower versus the U.S. dollar and the British pound was flat. Bond yields in the region were mostly lower.

Stocks in Asia were down while economic data reflected weakening in Chinese December exports and imports, adding to recent evidence of a Chinese slowdown, as the trade conflict with the U.S. continued. Mainland Chinese equities and those traded in Hong Kong fell, as the U.S./China trade surplus, which has been a talking point for U.S. officials to publicly justify Chinese concessions, grew by double-digits year-over-year.

Investors seemed concerned with the pace of resolution in the trade war even after China’s Commerce Ministry, last Thursday, said that recent trade talks were extensive and established a resolution to help address the concerns of both parties. day.

Random Thoughts and Observations

The Q4 2018 EPS reporting period is now upon us. S&P Capital IQ consensus estimates see growth of 12.1% for Q4 and 5.6% for all of 2019.

The Q4 estimate is lower than the forecasts on 12/31/2018 and 9/30/18, when S&P 500 EPS growth was pegged at 13.7% and 18.3%, respectively.

Through Q3 2018, the S&P 500 recorded 27 consecutive quarters in which the actual results exceeded end-of-quarter estimates. Will the same hold true for Q4? Also, while all 11 sectors posted EPS growth in Q3 2018, nine of 11 will likely see gains in Q4, led by energy, financials and industrials, with consumer staples and utilities showing year-on-year declines.

Full-year 2019 EPS growth estimates have also taken a haircut from the 10.0% rate expected at the end of Q3 2018 to the 6.5% forecast as of 12/31/18. What’s more, all 11 sectors have seen reductions to their 2019 growth estimates.

Finally, S&P 500 revenues are projected to rise 6.1% in Q4, as well as 8.7% for all of 2018, but are expected to slow to +6.8% in 2019.

Market Insights 1/11/2019

U.S. equities finished modestly lower for the last session of the week, but notched the third–straight weekly advance.

Caution was also palpable ahead of the unofficial start of earnings season with major players in the banking sector reporting early next week.

Treasuries gained ground amid a consumer price inflation report that was in line with expectations, and the U.S. dollar ticked higher, while gold added to a recent move upward and crude oil pared back from its current run.

–The Markets–

The Dow Jones Industrial Average declined 6 points to 23,996

The S&P 500 Index was nearly unchanged at 2,596

The Nasdaq Composite fell 15 points (0.2%) to 6,971

In moderate volume, 802 million shares were traded on the NYSE and 2.0 billion shares changed hands on the Nasdaq

WTI crude oil lost $1.00 to $51.59 per barrel and wholesale gasoline was $0.03 lower at $1.40 per gallon

The Bloomberg gold spot price rose $1.05 to $1,287.70 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—inched 0.1% higher to 95.98

Markets were higher for the week, as the DJIA rose 2.3%, the S&P 500 Index grew 2.5%, and the Nasdaq Composite advanced 3.5%

Consumer price inflation matches forecasts

The Consumer Price Index (CPI) dipped 0.1% month-over-month (m/m) in December, in line with the Bloomberg estimate, and versus November’s unrevised flat reading. The core rate, which strips out food and energy, moved 0.2% higher m/m, in line with expectations calling for it to match November’s unadjusted increase. Y/Y, prices were 1.9% higher for the headline rate, in line with forecasts and coming in south of November’s unrevised 2.2% increase. The core rate was up 2.2% y/y, matching projections to remain at November’s increase.

Treasuries were higher, with the yields on the 2-year note and the 30-year bond dropped 3 basis points (bps) to 2.54% and 3.03%, respectively, while the yield on the 10-year note fell 4 bps to 2.70%.

Treasury yields have nudged higher and the U.S. dollar has seen some pressure as of late, while the stock markets have gained ground for five-Treasury yields have nudged higher and the U.S. dollar has seen some pressure as of late, while the stock markets have paused after gaining ground for five-consecutive sessions, with the Fed offering dovish commentary to help ease policy mistake concerns and amid signs that U.S.-China trade talks have progressed ahead of the March deadline for the 90-day tariff truce. However, Q4 earnings season looms and will kick into gear next week and the government remains partially shut down.

Europe and Asia mixed following week of gains

European equities finished mixed, but higher for a second-consecutive week, with a sundry of regional uncertainties and economic data taking some of the luster off of a rally in global markets on eased Fed concerns and U.S.-China trade optimism. Brexit anxiety continued to fester, ahead of next week’s key vote, exacerbated by data showing U.K. manufacturing and industrial production unexpectedly declined in November, while the nation’s three-month GDP growth decelerated to the slowest pace in six months. The euro was lower and the British pound rose versus the U.S. dollar, while bond yields in the region were mostly lower.

Stocks in Asia finished mixed, with the major markets in the region appearing to find support from the extended winning streak in the U.S. yesterday, which has come amid lingering optimism of trade talks between the U.S. and China, as well as a host of dovish commentary from the Fed that has eased monetary policy mistake concerns. Japanese equities led to the upside, with the yen showing signs of stabilization after a recent rally, and despite some downbeat news out of the retail sector.

Shares in mainland China and Hong Kong advanced ahead of some key lending statistics set to be released over the weekend, while stocks traded in South Korea also moved higher. However, Australian securities declined amid some weakness in the heavyweight financial and materials sectors and markets in India also fell.

Stocks continue strong start to 2019

U.S. stocks posted a third-straight weekly gain, on upbeat trade sentiment and the continued easing of Fed monetary policy mistake worries. The continued retreat in the U.S. dollar and recovery in crude oil prices also likely contributed to improved investor conviction.

Stocks showed resiliency in the face of Samsung’s profit warning that followed Dow member Apple’s recent negative preannouncement, as well as a host of disappointing holiday sales figures out of the retail sector. Optimism that the U.S. and China could reach a trade deal before the 90-day truce ends in March was fostered by mid-level talks that were extended to Wednesday being characterized as extensive.

Fed concerns eased as a plethora of Central Bank officials—headlined by a second dose of comments from Chairman Jerome Powell in less than a week—continued to stress that it can be patient and flexible with rate hikes. The commentary out of the Fed was joined by the minutes from its December policy meeting that showed the details of the discussion seemed to be a bit more dovish than the statement led on.

Treasury yields nudged higher as the economic calendar, although remaining stunted by the drawn out partial government shutdown, showed against the backdrop of subdued inflation pressures, the ISM non-Manufacturing Index continued to signal solid expansion in key U.S. services sector activity, jobless claims fell and job openings remained elevated.

Next week, the economic calendar could continue to be muted if the government shutdown remains, but the docket will still be heavy, delivering inflation data in the form of the Producer Price Index and Import Price Index. Also, housing will come into focus with the NAHB Housing Market Index and housing starts and building permits report, along with manufacturing as regional reports out of New York and Philadelphia will be joined by the Fed’s industrial production and capacity utilization release.

However, the unofficial start to Q4 earnings season could be a key factor in whether the stock markets continue the solid rebound to kick off 2019. Earnings growth is expected to slow but cling to the fifth-straight quarter of double-digit expansion, per data compiled by FactSet. The financial sector will be in focus as some heavyweights are on the docket, starting with Citigroup Inc. (C $57) on Monday, and trading activity, net interest margin and lending activity are poised to garner scrutiny, along with guidance and conference call commentary.

Market Insights 1/9/2019

U.S. stocks advanced for a fourth-straight session and look poised to extend a weekly winning streak to three, courtesy of growing trade optimism and further dovish commentary out of the Fed.

Stocks pared gains as lawmakers in Washington continued to dig in, suggesting the drawn out battle to end the partial government shutdown will likely continue.

Treasury yields were mixed and the U.S. dollar continued to fall to October lows, with the minutes from the Fed’s December meeting scrutinized.

Gold rose and crude oil prices extended a sharp recovery.

The Markets…

The Dow Jones Industrial Average moved 92 points higher (0.4%) to 23,879

The S&P 500 Index increased 11 points (0.4%) to 2,585

The Nasdaq Composite gained 60 points (0.9%) to 6,957

In moderately heavy volume, 941 million shares were traded on the NYSE and 2.4 billion shares changed hands on the Nasdaq

WTI crude oil traded $2.58 higher to $52.36 per barrel and wholesale gasoline was up $0.07 at $1.43 per gallon

The Bloomberg gold spot price rose $8.14 to $1,293.53 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—fell 0.7% to 95.16

Mortgage applications surge

The MBA Mortgage Application Index rose 23.5%, following the prior week’s 8.5% decline. The increase came as a 35.3% rise in the Refinance Index combined with a 16.5% advance for the Purchase Index. The average 30-year mortgage rate decreased 10 basis points to 4.74%.

The markets paid some attention to the minutes from the Federal Open Market Committee’s (FOMC) December meeting, in which it decided to raise rates for the fourth time in 2018 and issued a statement that appeared to be less dovish than some had hoped. The details of the discussion seemed to be a bit more dovish than the statement led on, with the debate intensifying as the Fed grapples with maintaining its current path to normalization in the current global environment.

The report showed, “Participants expressed that recent developments, including volatility in financial markets and the increased concerns about global growth, made the appropriate extent and timing of future policy firming less clear than earlier.” As such, since the meeting, comments from the Fed, notably Chairman Jerome Powell, have eased concerns of a potential policy mistake, helping support the recent rebound in stocks and bog down the U.S. dollar to lows not seen since October.

Treasuries were mixed, with the yield on the 2-year note declining 2 bps to 2.56% and the yield on the 10-year note dipping 1 bp to 2.72%, while the 30-year bond rate ticked 1 bp higher to 3.01%.

Tomorrow, with the partial government shutdown likely continuing to postpone a host of reports, the economic calendar will still bring the release of weekly initial jobless claims, projected to decline by 5,000 to 226,000.

Fed Chairman Jerome Powell is set to speak again, but his comments are not likely to differ significantly from last Friday where he helped boost the markets by highlighting patience and flexibility with rate hikes, while opening up the idea that it could tweak its debt-laden balance sheet and stressing that the Central Bank is data dependent.

Global markets rise on Fed and U.S./China trade talk optimism

European equities finished mostly higher, and Asian equities rose broadly, led by markets in China, Japan and South Korea as investor confidence in a trade deal between the world’s two largest economies appears to continue to rise. The unscheduled extension of trade discussions to a third day looked to give markets hope that progress on a deal could be announced soon.

Global sentiment also seemed to receive a boost and the U.S. markets extended a recent rebound as concerns that the Fed may be on the verge of a policy mistake continued to ease amid further dovish commentary from Central Bank officials. Technology and consumer discretionary stocks that have been hampered by trade uncertainty helped pace a widespread advance. Energy issues also contributed to the gains as crude oil prices continued to rally, while cyclically-sensitive sectors like materials and industrials lent support.

Economic data was mostly upbeat as the Eurozone unemployment rate fell to the lowest number in a decade, German exports slipped by a slightly smaller amount than expected and Japanese wage figures rose more than expected. However, Brexit tensions continued to simmer with the U.K. Parliament expected to vote on the Prime Minister’s divorce agreement on January 15.

The euro and British pound advanced versus the U.S. dollar, which extended a recent drop to lows not seen since October amid the continued dovish Fed commentary and increased trade optimism. The Japanese yen continued to pare a recent advance during the trading session.

Market Insights 1/8/2019

U.S. stocks extended a recent rebound and are on track for a third-straight weekly gain, courtesy of continued trade optimism and an apparent carry over of support from recent dovish Fed commentary.

Stocks shrugged off an earnings warning from Samsung, disappointing Eurozone economic data and the continued partial government shutdown.

Gold declined, while Treasury yields, the U.S. dollar and crude oil prices moved higher.

The Markets…

The Dow Jones Industrial Average rose 256 points (1.1%) to 23,787

The S&P 500 Index added 25 points (1.0%) to 2,574

The Nasdaq Composite increased 74 points (1.1%) to 6,897

In moderately heavy volume, 1.0 billion shares were traded on the NYSE and 2.3 billion shares changed hands on the Nasdaq

WTI crude oil rose $1.26 to $49.78 per barrel and wholesale gasoline was $0.02 higher at $1.36 per gallon

The Bloomberg gold spot price declined $3.75 to $1,285.46 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—advanced 0.3% to 95.93

Job openings, small business optimism fall

The Labor Department’s Job Openings and Labor Turnover Survey (JOLTS), a measure of unmet demand for labor, fell to 6.89 million jobs available to be filled in November from October’s upwardly-adjusted 7.13 million, and versus the Bloomberg forecasted of 7.05 million. The hiring rate ticked lower to 3.8% from October’s 4.0% pace, and the separation rate dipped to 3.7%, from October’s 3.8% level.

Treasuries were lower, with the yield on the 2-year note gaining 4 basis points to 2.58%, the yield on the 10-year note rising 3 bps to 2.72%, and the 30-year bond rate ticking 1 bp higher to 3.00%.

The National Federation of Independent Business (NFIB) Small Business Optimism Index for December declined to 104.4, from the prior month’s unrevised 104.8 level, and versus expectations of a dip to 103.0. Trade balance data is postponed due to the government shutdown.

Europe higher, Asia mixed, as trade and tech earnings command attention

European equities finished broadly higher amid relative trade optimism as the first face-to-face trade talks since President Trump and Chinese President Xi Jinping agreed to a 90-day truce continued and reports suggested progress is being made and the discussions could extend to a third day.

The markets showed some resiliency in the face of an unexpected drop in German industrial production, which followed yesterday’s factory orders miss, as well as softer-than-expected Eurozone economic and business activity sentiment reports. Investors also continued to focus on the pace of Fed monetary policy normalization as some key inflation data and another speech from Fed Chairman Jerome Powell will end the week. Brexit political worries continued to fester around whether the U.K. would request an extension of Article 50—delaying the late-March timeline for the U.K. to cease being a member of the European Union.

The euro and British pound were lower versus the U.S. dollar, while bond yields in the region were mostly higher.

Asian stocks finished mixed amid lingering optimism of a development in the trade conflict between the world’s two largest economies and anticipation of the upcoming earnings season. Japanese markets gained ground with the yen paring a recent rally and the auto sector showing strength.

Mainland Chinese stocks dipped and Hong Kong markets nudged higher as markets awaited news from the second day of vice-ministerial level trade meetings between the U.S. and China. The trade talks come ahead of the expiration of a 90-day truce on further tariffs between the two countries.

South Korean equities were hampered by some disappointing earnings reports in the tech sector, while Australian stocks rose amid the recent rebound in the global markets and Indian markets advanced after late yesterday’s 2019 GDP estimate showed growth should accelerate.

Market Insights 1/7/2019

U.S. equities finished higher to begin the week, as trade talks between Chinese and U.S. officials were in focus, and as last week’s strong labor report and dovish comments from Fed Chairman Jerome Powell continued to aid sentiment.

Treasuries were lower, despite a larger-than-expected decline in domestic services sector activity, and as the U.S. government shutdown entered its third week.

The U.S. dollar was lower, gold was higher and crude oil prices added to a recent rally.

The Markets….

The Dow Jones Industrial Average rose 98 points (0.4%) to 23,531

The S&P 500 Index added 18 points (0.7%) to 2,550

The Nasdaq Composite increased 85 points (1.3%) to 6,823

In heavy volume, 1.0 billion shares were traded on the NYSE and 2.5 billion shares changed hands on the Nasdaq

WTI crude oil rose $0.56 to $48.52 per barrel and wholesale gasoline was $0.01 lower at $1.34 per gallon

The Bloomberg gold spot price gained $2.23 to $1,288.28 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—declined 0.5% to 95.71

Non-manufacturing data lower, below expectations

The December Institute for Supply Management (ISM) non-Manufacturing Index decreased to 57.6 from November’s 60.7 level, and versus the Bloomberg forecast of a drop to 58.5. A reading above 50 denotes expansion. New orders remained at levels north of 60, while business activity expansion moved slightly south of 60, and employment growth dipped to 56.3. Prices declined to 57.6. Non-manufacturing activity accounts for a large majority of U.S. economic output and the ISM said, overall the respondents noted that there is still is concern about tariffs, despite the hold on increases by the U.S. and China.

Treasuries were lower, as the yield on the 2-year note increased 4 basis points (bps) to 2.54%, the yield on the 10-year note gained 3 bps to 2.69%, and the 30-year bond rate ticked 1 bp higher to 2.99%.

Tomorrow’s economic calendar will hold the National Federation Independent Business (NFIB) Small Business Optimism Index, anticipated to decline to a level of 103.0 during December from November’s 104.8 level, as well as the Job Openings and Labor Turnover Survey (JOLTS), with the measure of unmet demand for labor expected to increase during November to indicate 7.10 million jobs were available to be filled from October’s 7.08 million figure.

Europe mixed, Asia higher as trade talks between the U.S. and China begin

European equities finished mixed with optimism after the start of vice-ministerial level trade talks with the U.S. and China in Beijing appearing to be offset by oil price concerns, in tandem with global economic growth worries.

European markets continued to digest last week’s comments from Fed Chair Jerome Powell that the Federal Reserve will be patient and flexible with rate hikes, tweaking its debt-laden balance sheet and watching incoming data. Brexit anxiety remained within the periphery as the British Parliament prepares to debate Prime Minister Theresa May’s Brexit withdrawal agreement, with reports of a vote on January 15.

The euro and British pound were higher versus the U.S. dollar, while bond yields in the region were mostly lower.

Stocks in Asia finished higher to kick off the week, with the start of a new round of talks between the U.S. and China buoying sentiment on the heels of the People’s Bank of China cutting its reserve ratio, positive U.S. jobs and manufacturing reports, as well as dovish comments from Fed Chair Jerome Powell. Stocks in Japan surged on the U.S. data and Fed Chair statements, despite p the country’s services data dipping slightly.

Mainland Chinese equities and those traded in Hong Kong advanced, as Washington and Beijing began vice-ministerial level trade talks that will carry over through Tuesday, with reports that both parties have expressed a willingness to work together.

The markets are awaiting the ramp up of global earnings season, with concerns about a slowing global economy adding to the volatility in stocks as of late. Meanwhile, markets in Australia, South Korea and India all traded higher.