Market Insights 9/13/2013

U.S. equities were higher amid eased trade concerns, with the U.S. looking to engage in another round of talks with China, as well as a second dose of cooler-than-expected inflation data that appeared to calm some Fed jitters.

Technology stocks recovered from some resurfaced scrutiny of the space to lead the way, while Treasury yields were nearly flat and the U.S. dollar extended a drop following the inflation report, a decline in jobless claims, and after unchanged monetary policy decisions from the European Central Bank and Bank of England.

Gold and crude oil prices were lower.

The Markets….

The Dow Jones Industrial Average (DJIA) rose 147 points (0.6%) to 26,146

The S&P 500 Index was 15 points (0.5%) higher at 2,904

The Nasdaq Composite increased 59 points (0.8%) to 8,014

In moderate volume, 756 million shares were traded on the NYSE and 2.3 billion shares changed hands on the Nasdaq

WTI crude oil fell $1.78 to $68.59 per barrel and wholesale gasoline lost $0.04 to $1.99 per gallon

The Bloomberg gold spot price moved $4.68 lower to $1,201.56 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—was down 0.3% to 94.56

Inflation data misses again, jobless claims surprisingly dip

The Consumer Price Index (CPI) rose 0.2% month-over-month (m/m) in August, below the Bloomberg estimate of a 0.3% gain, and matching July’s unrevised increase. The core rate, which strips out food and energy, ticked 0.1% higher m/m, below expectations to match July’s unadjusted 0.2% gain. Y/Y, prices were 2.7% higher for the headline rate, south of forecasts of a 2.8% rise and July’s unrevised 2.9% increase. The core rate was up 2.2% y/y, below projections to match July’s unadjusted 2.4% increase. Energy and shelter prices rose, along with airline fares and used auto prices, but apparel weighed on the index after posting the largest decline in about seven decades, per Bloomberg. Prices for medical care, communication, recreation and personal care also declined. The report follows yesterday’s wholesale price inflation data that dipped for the first time in eight months.

Weekly initial jobless claims dipped by 1,000 to 204,000, versus estimates calling for a rise to 210,000, with the prior week’s figure being revised higher by 2,000 to 205,000. The four-week moving average declined by 2,000 to 208,000, while continuing claims fell by 15,000 to 1,696,000, south of estimates of 1,710,000.

Treasuries were little changed, as the yield on the 2-year note and the 30-year bond were flat at 2.76% and 3.11%, respectively, while the yield on the 10-year note ticked 1 basis point (bp) higher to 2.97%. The U.S. dollar reversed lower, as the inflation data appeared to keep accelerated Fed rate hike jitters in check.

The markets continued to grapple with festering global trade uncertainties, though reports yesterday suggested the U.S. is seeking another round of talks with China, as well as a host of global monetary policy decisions. The European Central Bank and Bank of England left their stances unchanged, while Turkey’s central bank hiked its benchmark rate by 625 bps to 24.00%. The moves come as the Fed is highly-expected to raise rates later this month, bolstered by last week’s stronger-than-expected August non-farm payroll report that showed wage growth topped estimates, but a December move remains a source of uncertainty, exacerbated by today’s inflation data

Europe mixed on trade and central bank decisions, Asia higher

European equities finished mixed, with global trade concerns easing a bit amid reports the U.S. is seeking another round of talks with China, though President Donald Trump responded by saying he feels no pressure to reach a deal with China. Monetary policy garnered heavy attention, with the Bank of England (BoE) and European Central Bank (ECB) holding their policy stances unchanged, as expected. Moreover, Turkey decisively hiked its benchmark rate to 24.00% from 17.75%, which lent some support to the European banking sector and fostered a jump in the lira, which has been pummeled by the nation’s economic turmoil.

The BoE upgraded its economic growth forecast but warned of Brexit uncertainty, while the ECB notched down its economic growth forecast as expected and maintained its inflation outlook. President Mario Draghi noted at the customary press conference following the decision that underlying economic strength will likely mitigate downside risks but a major source of uncertainty comes from the rise of protectionism.

The euro and British pound rose versus the U.S. dollar following the decisions and a second day of cooler-than-expected U.S. inflation data. Bond yields in the region were mostly higher. The rise in the pound hampered the U.K. markets and resurfacing Italian budget uncertainty hamstrung conviction in Italy.

Stocks in Asia finished mostly to the upside amid eased trade concerns on reports that the U.S. and China could hold another round of talks, while some upbeat data in the region appeared to support sentiment.

Japanese equities rose, with the yen giving back some recent gains, while the nation reported a much stronger-than-expected rise in July machine orders—a gauge of business spending. Stocks in mainland China and Hong Kong rallied on the eased trade worries that had dragged the latter into bear market territory this week.

Markets in South Korea ticked slightly higher, but those in Australia declined with the markets seeming to weigh a noticeably stronger-than-expected August employment report with what that could mean for monetary policy. Markets in India were closed for a holiday. Monetary policy was in focus ahead of today’s decisions out of Europe and as Turkey decisively hiked its benchmark interest rate that sparked a rally in the lira to cool some concerns that have hampered emerging markets