Market Insights 8/28/2018

U.S. stocks finished the regular trading session slightly higher, holding a mild advance amid subdued trade concerns following yesterday’s announced bilateral agreement between the U.S. and Mexico, with Canada joining negotiations today.

Consumer Confidence jumped to its highest level in nearly 18-years and the advance goods trade balance widened much more than forecasted.

Treasury yields were higher, while gold, the U.S. dollar and crude oil prices declined.

The Markets…

The Dow Jones Industrial Average advanced 14 points (0.1%) to 26,064

The S&P 500 Index increased 1 point to 2,898

The Nasdaq Composite gained 12 points (0.2%) to 8,030

In moderate volume, 617 million shares were traded on the NYSE and 1.9 billion shares changed hands on the Nasdaq

WTI crude oil ticked $0.34 lower to $68.56 per barrel and wholesale gasoline was down $0.01 at $2.08 per gallon

The Bloomberg gold spot price shed $10.13 to $1,201.25 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—was nearly 0.1% lower at 94.72

Consumer Confidence unexpectedly rises to near 18-year high

The Consumer Confidence Index surprisingly improved to 133.4—the highest since October 2000—in August, from July’s upwardly-revised 127.9, and versus the Bloomberg estimate of 126.6. The Present Situation Index and the Expectations Index of business conditions for the next six months both increased solidly. On employment, the labor differential—consumers’ appraisal of jobs being “plentiful” minus being “hard to get”—rose to 30.0 from the 28.0 level posted in July.

The 20-city composite S&P CoreLogic Case-Shiller Home Price Index showed a 6.3% y/y gain in home prices in June, versus forecasts of a 6.4% rise. Month-over-month, home prices were up 0.1% on a seasonally adjusted basis for June, below expectations of a 0.2% gain.

Treasuries finished lower, with the yield on the 2-year note rising 2 basis points to 2.67%, the yield on the 10-year note gaining 3 bps to 2.88%, and the 30-year bond rate increasing 4 bps to 3.03%.

The U.S. dollar remained in retreat after hitting a 14-month high earlier this month, as the global markets grappled with solid domestic economic and earnings growth, and preserved Fed rate hike expectations, while trade optimism ticked higher as U.S. and Mexico reached a bilateral deal yesterday, and Canada took a seat at the negotiation table today in hopes to reach a revised NAFTA deal.

Tomorrow, the U.S. economic calendar will bring the second look (of three) at Q2 GDP, forecasted to show annualized quarter-over-quarter growth of 4.0% and personal consumption to have risen 3.9% q/q, after registering 4.1% and 4.0%, respectively in the first read. The docket will also deliver some housing data in the form of pending home sales, expected to have ticked 0.3% higher m/m for July, as well as the release of the weekly MBA Mortgage Applications report.

Europe mixed on Brexit and Italian uncertainty and trade optimism, Asia mostly higher

European equities finished mixed, amid lingering U.K. Brexit uncertainty and festering Italian budget concerns, though trade optimism carried over after yesterday’s agreement between Mexico and the U.S., which set the stage for talks with Canada and a potential new NAFTA deal. Autos and materials issues led to upside, while energy stocks saw some pressure as crude oil prices slipped.

The euro gained ground on the U.S. dollar, while the British pound dipped and bond yields in the region finished mostly higher. The U.K. markets moved higher after yesterday’s holiday break when the global markets nudged higher on the trade progress and measures taken by China to stabilize its currency.

With the markets choppy in the face of a host of uncertainties,there are some reasons to think that the probability of a repeat of a past crisis has eased, while the changes we have seen should help reduce the vulnerability of the global system to shocks like those of the past. However, risk has not been entirely eliminated from the system.

Stocks in Asia finished mostly higher, amid some trade optimism as the U.S. and Mexico reached a bilateral agreement, paving the way for talks with Canada and a potential new NAFTA agreement. Japanese equities ticked higher, with the yen slipping late in the day, while Australian securities gained ground, though the markets continued to grapple with the nation’s recent political shakeup.

Stocks trading in mainland China dipped while those trading in Hong Kong rose, in the wake of yesterday’s rally that came from the measures taken by the nation to try to stabilize the yuan. South Korean shares advanced and Indian equities finished higher, with emerging markets appearing to get a reprieve from the recent run in the U.S. dollar.

Emerging markets have seen some increased volatility as of late, with the U.S. dollar earlier this month reaching highs not seen in over a year and the Turkish economic/currency crisis escalating.