Monthly Archives: January 2019

Market Insights 1/31/2019

After yesterday’s rally, U.S. equities finished mixed, as lackluster reports from Dow members DowDuPont and Microsoft were a drag on the blue chip index.

Treasury yields were lower and the U.S. dollar was modestly higher amid mixed reports on the economic front. Crude oil prices and gold were higher.

The Markets…

The Dow Jones Industrial Average lost 15 points (0.1%) to 25,000

The S&P 500 Index gained 23 points (0.9%) to 2,704

The Nasdaq Composite advanced 99 points (1.4%) to 7,282

In heavy volume, 1.4 billion shares were traded on the NYSE and 2.9 billion shares changed hands on the Nasdaq

WTI crude oil declined $0.44 to $53.79 per barrel and wholesale gasoline was down $0.02 at $1.38 per gallon

The Bloomberg gold spot price ticked $0.17 higher to $1,320.08 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—gained 0.3% to 95.59

Manufacturing data declines, new home sales pop

The Q4 Employment Cost Index rose by 0.7% quarter-over-quarter, below forecasts and last quarter’s gain of 0.8%.

New home sales rose 16.9% month-over-month in November to an annual rate of 657,000 units, versus the Bloomberg forecast calling for 570,000 units and the upwardly revised 562,000 unit pace in October. The median home price was down 11.9% y/y to $302,400. New home inventory fell to 6.0 months of supply at the current sales pace from 7.0 months in October. Sales rose in the Northeast, Midwest, and the South but fell in the West. New home sales are based on contract signings instead of closings.

The Chicago Purchasing Managers Index decreased to 56.7 in January, from 63.8 in December, and well below expectations of 61.5, with a reading above 50 denoting expansion. Notable drags in the headline index were a two-year low in the New Orders component, and a 10-month low in the Production component.

Treasuries were higher, as the yields on the 2-year and the 10-year notes declined 5 basis points to 2.46% and 2.63%, respectively, while the 30-year bond rate was down 3 bps to 3.00%.

Tomorrow’s economic calendar will be highlighted by the January labor report, with non-farm payrolls expected to have increased by 165,000 following last month’s surprising 312,000 jump, while private sector payrolls are estimated to rise by 175,000. The unemployment rate is projected to remain at December’s 3.9% level and average hourly earnings are anticipated to rise 0.3% m/m. The ISM Manufacturing Index is also slated for release, with economists looking for a decline to 53.6 for January from the 54.1 posted in December, while the final University of Michigan Consumer Sentiment Index and November’s delayed construction spending and wholesale inventories reports will also be released.

Europe mostly lower, Asia mixed on data and Fed decision optimism

European equities finished mostly lower, as the markets digested some mixed global earnings results and comments from the Fed yesterday, while also keeping an eye on U.S./China trade discussions that remain underway. Yesterday’s U.S. monetary policy decision kept rate hike expectations in check, with Fed Chairman Jerome Powell noting that a “wait-and-see policy is warranted,” as “the case for raising rates has weakened.”

In economic news, Q4 Eurozone GDP expanded at a 1.2% y/y pace, in line with expectations, but below the 1.6% posted a year ago, while German December retail sales dropped 4.3%, the fastest pace in 11 years. Brexit also remained a focal point for investors, as EU officials informed the U.K. government that it will not renegotiate the current divorce agreement, despite demands from the U.K. Parliament. The euro was flat and the British pound rose versus the U.S. dollar, while bond yields in the region were lower.

Stocks in Asia finished mixed following the rally in the U.S. yesterday and after comments from Fed Chairman Jerome Powell’s press conference were closely scrutinized. Traders exuded some caution after China’s manufacturing PMI for January ticked higher to 49.5 from December’s 49.4, and above forecasts calling for a decline to 49.3, but it was the second-consecutive month in contraction territory for the measure, as the demarcation point between expansion and contraction is 50. The report may have reignited fears of inadequate stimulus measures from Chinese officials as the economy slows.

Stocks in mainland China and those traded in Hong Kong were able to post gains, as the Asian nation’s non-manufacturing PMI index was well above estimates at 54.7, whereas economists were looking for the level to remain at December’s 53.8. High level negotiations between the U.S. and China were also of note, as a comprehensive trade deal to end the tariff standoff remains elusive.

Japanese equities moved nicely higher, despite an advance in the yen versus the U.S. dollar and as December factory output remained in contraction territory.

Random Thoughts

Fed Chairman Jerome Powell gave investors a belated Christmas gift today with a dovish tone on the trajectory of interest rates and plans for flexibility with regards to the balance sheet runoff.

Powell admitted that financial conditions tightened in Q4 and acknowledged global economic growth concerns warrant consideration in monetary policy.

The Fed committed to being data dependent going forward. Despite the Fed Chair’s insistence that there is no motive for a “Powell Put” in today’s decision, the market reaction suggests investors think Powell is on their side and no additional rate hikes are expected in 2019.

Market Insights 1/30/2019

U.S. stocks rose, encouraged by results from Boeing & Apple as the markets closely examined Fed Chairman Jerome Powell’s press conference that followed a highly-expected unchanged monetary policy decision.

Treasury yields mostly reversed lower and the U.S. dollar reversed lower. Crude oil and gold prices gained ground.

The Markets…

The Dow Jones Industrial Average rose 435 points (1.8%) to 25,015

The S&P 500 Index gained 41 points (1.6%) to 2,681

The Nasdaq Composite advanced 155 points (2.2%) to 7,183

In moderate volume, 843 million shares were traded on the NYSE and 2.5 billion shares changed hands on the Nasdaq

WTI crude oil increased $0.92 to $54.23 per barrel and wholesale gasoline was up $0.03 at $1.40 per gallon

The Bloomberg gold spot price traded $7.22 higher to $1,319.01 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—fell 0.4% to 95.45

Fed continues to sound dovish tone, ADP employment report tops forecasts

The Federal Open Market Committee (FOMC) kept its monetary policy stance unchanged as widely expected. However, the accompanying more dovish statement appeared to give the markets what they wanted as it removed the “further gradual increases” language and added that “the Committee will be patient as it determines what future adjustments to the target range for the federal funds rate may be appropriate.”

Treasuries, especially on the short-end of the curve mostly reversed higher following the decision and the U.S. dollar decisively reversed to the downside. The yield on the 2-year note dropped 6 bps to 2.51% and the yield on the 10-year note declined 2 bps to 2.69%, while the 30-year bond rate ticked 1 bp higher to 3.05%.

The ADP Employment Change Report showed private sector payrolls rose by 213,000 jobs in January, above the Bloomberg forecast of a 181,000 gain, while December’s increase of 271,000 jobs was revised to a 263,000 increase. Today’s ADP data, which does not include government hiring and firing, comes ahead of Friday’s broader January non-farm payroll report, expected to show jobs grew by 165,000 and private sector payrolls rose by 175,000. The unemployment rate is anticipated to remain at 3.9% and average hourly earnings are projected to rise 0.3% month-over-month.

The MBA Mortgage Application Index declined 3.0% last week, following the prior week’s 2.7% loss. The decrease came as a 5.5% drop in the Refinance Index was met with a 2.3% fall in the Purchase Index. The average 30-year mortgage rate gained 1 basis point to 4.76%.

Global markets mixed on Brexit votes and trade focus, ahead of Fed decision

European equities finished mixed, with the markets digesting a U.K. Parliamentary vote to reopen a negotiated Brexit deal with the European Union (EU) and eyeing the Fed’s monetary policy decision later today. A more controversial amendment—which looked to give the U.K. Parliament greater control over the process and timing of leaving the EU—was defeated, while a successful vote to renegotiate the Irish backstop portion of the agreement will send Prime Minister Theresa May back to Brussels for another round of discussions.

In economic news, Eurozone economic sentiment fell in January to a two-year low, French consumer spending fell more than expected but the nation’s Q4 GDP growth beat forecasts, and German consumer price inflation declined. The euro declined and the British pound was little changed versus the U.S. dollar, while bond yields in the region were mostly lower.

Stocks in Asia finished mixed as U.S./China trade tensions seemed to remain escalated following charges leveled by the U.S. Justice department against Huawei earlier this week that came ahead of high-level talks between the two nations in Washington. Markets seemed to exercise some caution ahead of the trade negotiations, with both parties looking to make progress toward a permanent deal by a March 1 trade truce deadline, and today’s monetary policy decision in the U.S.

Chinese stocks finished mixed with some key January business activity data due out tonight, while Japanese equities declined as the yen was choppy versus the U.S. dollar and the nation’s December retail sales were above expectations.

Market Insights 1/29/2019

U.S. stocks finished mixed with trade uncertainty festering ahead of this week’s key talks between the U.S. and China, while the markets likely treaded cautiously ahead of tomorrow’s monetary policy decision from the Fed.

Treasury yields were lower and the U.S. dollar ticked higher, while the government shutdown seemed to pressure Consumer Confidence. Gold and crude oil prices moved to the upside.

The Markets…

The Dow Jones Industrial Average rose 52 points (0.2%) to 24,580

The S&P 500 Index dipped 4 points (0.2%) to 2,640

The Nasdaq Composite declined 57 points (0.8%) to 7,028

In moderate volume, 769 million shares were traded on the NYSE and 2.0 billion shares changed hands on the Nasdaq

WTI crude oil gained $1.32 to $53.31 per barrel and wholesale gasoline was up $0.02 at $1.37 per gallon

The Bloomberg gold spot price gained $8.39 to $1,311.75 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—was up 0.1% at 95.82

Consumer Confidence falls more than expected, home prices below forecasts

The Consumer Confidence Index fell to 120.2 in January from December’s downwardly-revised 126.6 and below Bloomberg estimates of 124.0. This was the lowest level since July 2017 as the Present Situation Index remained solid, but the Expectations Index of business conditions for the next six months fell sharply month-over-month.

The 20-city composite S&P CoreLogic Case-Shiller Home Price Index showed a 4.7% y/y gain in home prices in November, versus expectations of a 4.9% rise. Month-over-month (m/m), home prices were up 0.3% on a seasonally adjusted basis for November, south of forecasts calling for a 0.4% rise.

Treasuries finished higher, with the yield on the 2-year note decreasing 2 basis points (bps) to 2.57%, the yield on the 10-year note losing 4 bps to 2.71%, and the 30-year bond rate declining 3 bps to 3.04%. The Federal Open Market Committee (FOMC) began its two-day monetary policy meeting today and tomorrow the FOMC is not expected to announce another rate hike or deliver updated economic projections. However, the decision will be followed by a press conference by Fed Chairman Jerome Powell that will likely garner heavy scrutiny amid the backdrop of signs of a slowdown in the Fed’s balance sheet reduction measures and noticeable recent efforts to cool concerns that the FOMC was heading toward a policy mistake.

Ahead of the Fed’s decision and Friday’s key nonfarm payroll data, tomorrow’s economic calendar will bring the ADP employment change report, projected to show private sector payrolls rose by 181,000 in January, following December’s 271,000 jump. Mortgage applications and pending home sales will also be released.

Europe higher, Asia mixed ahead of Brexit votes and Fed, earnings continue to roll in

European equities finished higher, despite escalating trade tensions between the U.S. and China, a flood of mixed global earnings results and prior to a vote on Prime Minister Theresa May’s so-called “Plan B” Brexit deal. European markets appeared to be optimistic ahead of the Brexit vote, as U.K. Parliament will consider several amendments ahead of the key vote, which follows a disappointing loss for her original divorce plan earlier this month. A particularly controversial option is the Cooper-Boles amendment—which looks to give Parliament greater control over the process and timing of leaving the European Union.

Tomorrow’s monetary policy decision in the U.S. seemed to take a backseat, although it will likely be closely watched on Wednesday amid signs of anemic growth in Europe.

On the economic front, Spain’s unemployment rate dropped on the heels of warnings from the European Central Bank President yesterday that geopolitical factors and threats of protectionism are weighing on sentiment. Bond yields in the region were mixed. The euro was little changed and the British pound moved lower versus the U.S. dollar. After the stock markets closed, the British pound saw losses accelerate sharply after the Cooper-Boles amendment, which would have delayed a Brexit if no deal was made, was voted down to cause concerns regarding the worst case scenario of a no-deal Brexit to resurface.

Stocks in Asia mostly finished with losses in the wake of escalated U.S./China trade tensions stemming from charges by the U.S. Justice Department against Huawei. A spokesperson from China’s industry and information technology ministry stated Tuesday that the U.S. indictment was “unfair” and “immoral” ahead of highly-anticipated trade discussions in Washington D.C. later this week. Chinese growth concerns persisted with global earnings season rolling on and a host of reports referencing weaker macroeconomic conditions in the country.

Mainland Chinese stocks and markets in Hong Kong dipped, though Japanese equities ticked higher, recovering from losses earlier in the session, even as the yen gained ground versus the U.S. dollar. Australian markets were bogged down by weaker financials and Indian stocks dipped, while South Korean equities also showed some mid-session resiliency and posted an advanced.

Market Insights 1/28/2019

U.S. equities finished the first trading session of the week with solid losses, courtesy of a disappointing earnings report and guidance from Dow member Caterpillar and a warning from NVIDIA.

Treasury yields and gold were lower, the U.S. dollar was nearly unchanged, while crude oil prices also fell amid uncertainties surrounding the ongoing crisis in Venezuela.

The Markets…

The Dow Jones Industrial Average fell 209 points (0.8%) to 24,528

The S&P 500 Index lost 21 points (0.8%) to 2,644

The Nasdaq Composite tumbled 79 points (1.1%) to 7,086

In moderate volume, 821 million shares were traded on the NYSE and 2.4 billion shares changed hands on the Nasdaq

WTI crude oil declined $1.70 to $51.99 per barrel and wholesale gasoline was down $0.05 at $1.35 per gallon

The Bloomberg gold spot price retreated $1.16 to $1,304.09 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—was unchanged at 95.76

Regional manufacturing data rises

The Dallas Fed Manufacturing Activity Index showed growth expanded in January, increasing more-than-expected to 1.0 from December’s unrevised -5.1 level, versus expectations of -2.7, with a reading of zero the demarcation point between expansion and contraction.

Treasuries were higher, as the yields on the 2-year and 10-year notes fell 2 basis points (bps) to 2.58% and 2.73%, respectively, while the 30-year bond rate was flat at 3.07%.

U.S. equities have rebounded as some macro concerns have eased, however risks remain and we don’t believe that stocks are yet fully in the clear—volatility will likely persist and our tactical recommendations remain modestly defensive. Recession concerns have receded somewhat, alongside waning worries that the Federal Reserve will go too far. That said economic growth is slowing and the Fed still has a difficult road to navigate—especially given its dual mandate of price stability and full employment.

Europe lower, Asia mixed as markets brace for robust week

European equities finished lower, as caution may have settled in as a busy week of economic and earnings events begins. Mining stocks tempered the downturn somewhat and traded higher prior to a new series of trade discussions between the world’s two largest economies set for later this week. U.K. Prime Minister Theresa May’s latest Brexit proposal will go to a vote tomorrow after a crushing Brexit vote failure earlier in the month. A successful vote may send the Prime Minister back to Brussels to request concessions from the EU, which so far has refused to renegotiate the current exit agreement.

European Central Bank (ECB) President Mario Draghi’s warned on geopolitical factors and threats of protectionism that are weighing on economic sentiment during introductory remarks to the European Parliament today after the ECB left rates unchanged last week and the December Eurozone money supply held steady from the previous month.

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

Stocks in Asia finished mixed to begin the week that will see earnings season ramp up, a new round of high-level U.S./China trade discussions and the U.S. Central Bank deliver its monetary policy decision.

Mainland Chinese equities declined, while those traded in Hong Kong were flat, as China’s December industrial profits shrank for a second-straight month, and ahead of Chinese Vice Premier Liu He’s scheduled arrival in Washington this week to lead trade negotiations.

Stocks in Japan finished lower amid some choppiness in the yen, while December services data for the Asian nation nudged lower month-over-month. Shares in South Korea were flat with tech stocks struggling for gains, and listings in India rose, while markets in Australia were closed for a holiday.

Random Thoughts

After slumping early in the week, equity benchmarks fought to regain lost ground by week’s end, possibly in anticipation of the reopening of the U.S. government.

Global and mid-cap stocks succeeded, while small-caps came close. Even large-caps lost only 0.2%. In addition, five of 11 sectors in the S&P 1500 closed the week unchanged or higher, led by real estate, tech and utilities, while the consumer staples, energy, and health care groups ended in the red.

As of 1/25/19, 80% of the 1500’s sub-industries were again trading above their 10-week (50-day) moving average, after delivering a washed-out reading of less than 1.0% toward the end of 2018. With the S&P 500 now up more than 10% since the beginning of the shutdown, and with the percentage of sub-industries trading above their 10-week moving average approaching a level of extreme, a digestion of gains may be in order, driven by last week’s further erosion of 2019 EPS growth estimates.

Market Insights 1/25/2019

U.S. stocks finished nicely higher to close out a mixed week that came on the heels of four-straight weekly gains, with earnings season continuing to paint a relatively positive picture, highlighted by Starbucks.

Markets shrugged off Dow member Intel’s softer-than-expected revenues and guidance, as well as festering political turmoil.

Treasury yields gained ground and the U.S. dollar fell. Crude oil prices and gold traded to the upside.

The Markets..

The Dow Jones Industrial Average rose 176 points (0.7%) to 24,729

The S&P 500 Index gained 22 points (0.9%) to 2,665

The Nasdaq Composite rose 91 points (1.3%) to 7,165

In moderate volume, 863 million shares were traded on the NYSE and 2.4 billion shares changed hands on the Nasdaq

WTI crude oil advanced $0.56 to $53.69 per barrel and wholesale gasoline was flat at $1.40 per gallon

The Bloomberg gold spot price rose $21.86 to $1,303.08 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—dropped 0.8% to 95.76

Markets were mixed for the week, as the DJIA and the Nasdaq Composite ticked 0.1% higher, while the S&P 500 Index dipped 0.2%

Treasuries are lower, President Trump announces short-term deal to reopen government

Treasuries were lower, with the yields on the 2-year and 10-year notes rising 3 basis points to 2.60% and 2.75%, respectively, while the 30-year bond rate advanced 2 bps to 3.06%. s.

U.S. equities have rebounded as some macro concerns have eased, however risks remain and we don’t believe that stocks are yet fully in the clear—volatility will likely persist and our tactical recommendations remain modestly defensive. Recession concerns have receded somewhat, alongside waning worries that the Federal Reserve will go too far. That said economic growth is slowing and the Fed still has a difficult road to navigate—especially given its dual mandate of price stability and full employment. Brexit drama continues but the need for investors to worry may be limited.

Global markets mostly higher as ramped-up earnings season in focus

European equities finished mostly higher with the tech sector rallying, shrugging off guidance from Intel Corporation that missed analyst’s forecasts and an interview with Commerce Secretary Wilbur Ross on Thursday that offered a gloomy outlook on the progress of U.S./China trade negotiations. Earnings were in sharp focus along with the European Central Bank’s (ECB) somewhat downbeat economic outlook after yesterday’s unchanged monetary policy decision. ECB President Margio Draghi warned, in a press conference after the decision, on risks of protectionism, susceptibilities of emerging markets and overall financial market volatility.

U.K. stocks were hamstrung by some disappointing results from a key player in the telecommunications sector, as well as the British pound’s strong rise versus the U.S. dollar. The pound rallied amid a report from the Sun newspaper suggesting Northern Ireland’s Democratic Unionist Party may back Prime Minister Theresa May’s “Plan B” Brexit deal, which faces a parliamentary vote on Tuesday.

Stocks in Asia finished mostly higher as Chinese markets, along with South Korean issues, led the way amid the improved sentiment toward the technology sector on the heels of the host of favorable earnings reports from the chip sector in the U.S. yesterday.

Chinese stocks also found support from approvals of a few titles for some key gaming companies. China’s gaming industry, which is the world’s largest, has seen disruption from a prolonged freeze of approvals for new games. Japanese stocks gained solid ground, with the yen retreating somewhat late in the day, even as January inflation data continued to accelerate from December’s levels, two days after the Bank of Japan offered a cautious outlook on prices after holding interest rates steady.

Australian markets were lifted by its key financial, while Indian equities bucked the trend and dipped amid.

Stocks mixed after four-week winning streak but tech continues rally

U.S. stocks were mixed this week after four-straight weekly gains, with global growth concerns exacerbated by some softer-than-expected Eurozone economic data, while performance during the holiday-shortened week was focused on earnings season. Thus far, of the 113 S&P 500 companies reporting, revenue beat rates stand at 58% and profit beat rates exceed 70%, per data by Bloomberg. Earnings season has seen mixed results offset by guidance that appeared to ease concerns about a near-term earnings recession.

The technology sector was a standout winner, bolstered by a rally in chip-related stocks as the Street cheered reports from Lam Research Corporation and Texas Instruments Inc. Results from some blue-chip stocks also added to the favorable backdrop, headlined by results from Dow members Procter & Gamble Company, International Business Machines Corporation and United Technologies Corporation. Stocks showed relative resiliency in the face of U.S.-China trade relation concerns, with conflicting reports that the U.S. had cancelled a trade planning meeting to start the week, and pessimistic comments from U.S. Commerce Secretary Wilbur Ross regarding the progress of talks ahead of next week’s round of meetings. Stocks also continued to shrug off the persisting government shutdown until a short-term deal to reopen the government was announced Friday afternoon.

Treasury yields moved lower and the U.S. Dollar Index relinquished a weekly gain amid Friday’s drop, while crude oil prices dipped on the heels of a recent bounce.

This sets the stage for next week’s fully-loaded economic calendar, with reports that have been postponed potentially pouring in. The first look (of three) at Q4 GDP is slated to be released, along with Consumer Confidence and personal income and spending. However, the three events that are likely to garner the most attention and compete with a robust earnings season include: The Fed’s monetary policy decision, along with January ISM Manufacturing Index and non-farm payroll releases.

The Fed is not expected to announce any changes to its stance but the press conference by Chairman Jerome Powell could see some scrutiny and provide further clarity on the Central Bank’s stance. The Fed recent pivot to patience following a string of rate hikes and December’s much stronger-than-expected non-farm payroll report were key catalysts that started the stock market rally in the wake of the Christmas Eve tumble and helped alleviate the sting from the December drop in the ISM Manufacturing Index, which appeared to stoke global growth concerns.

Market Insights 1/24/2019

U.S. equities finished mixed in choppy trading, as early optimism following some positive earnings results came up against an increase in worries over trade in the wake of downbeat comments from U.S. Commerce Secretary Wilbur Ross.

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

The Markets…

The Dow Jones Industrial Average fell 22 points (0.1%) to 24,553

The S&P 500 Index nudged 4 points (0.1%) higher to 2,642

The Nasdaq Composite rose 48 points (0.7%) to 7,073

In moderate volume, 789 million shares were traded on the NYSE and 2.3 billion shares changed hands on the Nasdaq

WTI crude oil gained $0.51 to $53.13 per barrel and wholesale gasoline was unchanged at $1.40 per gallon

The Bloomberg gold spot price declined $2.01 to $1,280.71 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—was up 0.5% at 96.58

Leading Index dips lower, manufacturing data rises

The Conference Board’s Index of Leading Economic Indicators (LEI) for December decreased 0.1% month-over-month, matching Bloomberg projections and compared to November’s unrevised 0.2% increase. The yield curve, jobless claims, and consumer expectations were positive, while stock prices, new orders and building permits were negative.

The preliminary Markit U.S. Manufacturing PMI Index showed growth increased more than expected, rising to 54.9 in January, from December’s 53.8 figure, and versus estimates calling for a dip to 53.5. Moreover, the preliminary Markit U.S. Services PMI Index showed growth decelerated less than expected for the key U.S. sector, decreasing to 54.2 from December’s 54.4 figure, versus expectations to nudge lower to 54.0. Readings above 50 for both indexes denote expansion.

Weekly initial jobless claims decreased by 13,000 to 199,000, below the estimate of 218,000 and at its lowest level since 1969, with the prior week’s figure revised downward to 212,000. The four-week moving average fell by 5,500 to 215,000, while continuing claims decreased by 24,000 to 1,713,000, south of estimates of 1,730,000.

Treasuries were higher, as yield on the 2-year note was down 2 basis points (bps) to 2.56%, while the yields on the 10-year note and the 30-year bond were 3 bps lower at 2.71% and 3.03%, respectively.

Tomorrow’s economic calendar had December durable goods orders and new homes sales slated for release, but as a result of the government shutdown, the reports have been delayed. No other reports are scheduled for tomorrow.

Europe mixed following European Central Bank decision, Asia mostly higher

European equities finished mixed, after the European Central Bank (ECB) left its monetary policy stance unchanged, as widely expected, while also mentioning concerns over slower growth. At a press conference following the central bank’s decision, ECB President Mario Draghi stated that significant stimulus remains essential and that near term growth momentum may be weaker while the risk around euro area growth has moved to the downside.

Brexit uncertainty lingered as momentum seems to be gathering to tamp down the notion of a no-deal Brexit, but viable alternatives remain unclear. The euro and the British pound were lower versus the U.S. dollar, while bond yields in the region also lost ground.

Stocks in Asia finished mostly to the upside, ahead of the European Central Bank rate decision, while investors remained aware of the trade conflict between the world’s two largest economies and the possibility that a trade planning meeting between them had been cancelled this week.

Mainland Chinese equities and those traded in Hong Kong advanced, stocks in Japan nudged lower, with the yen gaining ground on the U.S. dollar, and shares in India were also lower and Australian securities increased amid better-than-expected wage data, and South Korean listings gained ground, despite some lackluster reports out of the tech sector.

Market Insights 1/23/2019

After a brief spell in negative territory, U.S. equities finished higher, with the Dow getting a solid boost from upbeat results from members IBM, Procter & Gamble and United Technologies.

Treasuries were mostly lower, and the U.S. dollar fell, while crude oil prices and gold also lost ground.

The Markets…

The Dow Jones Industrial Average rose 171 points (0.7%) to 24,576

The S&P 500 Index nudged 6 points (0.2%) higher to 2,639

The Nasdaq Composite inched upward by 5 points (0.1%) to 7,026

In moderate volume, 773 million shares were traded on the NYSE and 2.2 billion shares changed hands on the Nasdaq

WTI crude oil lost $0.39 to $52.62 per barrel and wholesale gasoline was off $0.01 at $1.39 per gallon

The Bloomberg gold spot price declined $1.84 to $1,283.38 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—was down 0.2% at 96.12

Mortgage applications fall, manufacturing data rises

The Richmond Fed Manufacturing Activity Index for January increased to -2 from December’s level of -8, matching Bloomberg estimates. A reading of zero is the demarcation point between expansion and contraction.

The MBA Mortgage Application Index fell 2.7% last week, following the prior week’s 13.5% gain. The decrease came as a 5.3% drop in the Refinance Index was met with a 2.2% decline in the Purchase Index. The average 30-year mortgage rate gained 1 basis point to 4.75%.

Treasuries were mostly lower, as the yield on the 2-year note was unchanged at 2.59%, while the yields on the 10-year note and the 30-year bond were up 1 basis point at 2.75% and 3.07%, respectively.

Tomorrow’s economic calendar will be fairly robust, beginning with weekly initial jobless claims, forecasted to increase by 5,000 to 218,000, followed after the opening bell by the preliminary reads on Markit’s Manufacturing and Services PMIs for January, expected to modest declines in the levels for both figures to 53.5 and 54.0, respectively, but still above the level of 50 that indicates expansion in activity.

As well, the Index of Leading Economic Indicators (LEI) will be released, with economists anticipating a 0.1% month-over-month decline for December, while the January Kansas City Fed Manufacturing Activity Index will round out the day, forecasted to remain at December’s level of 3, with a reading above zero denoting expansion.

Europe mostly higher ahead of ECB decision, Asia mixed

European equities finished mostly higher, shifting upward amid the early rally in U.S. equities, and in the midst of the backdrop of mixed earnings sentiment. The markets appeared to trade a bit cautious ahead of tomorrow’s monetary policy decision from the European Central Bank (ECB) and as U.S./China trade worries flared up after reports emerged that the White House cancelled a trade planning meeting with Beijing.

U.S. economic advisor Larry Kudlow refuted the report on the CNBC, reiterating that no such trade planning meetings with China had been scheduled. Technology shares declined as earnings season continues to gain steam. Brexit headlines continued to be in focus, pressuring U.K. stocks, and British officials announced that the country’s trade minister will meet with European counterparts at the World Economic Forum to discuss rolling over existing European trade agreements after the divorce is finalized.

Mainland Chinese equities ticked 0.1% higher and those traded in Hong Kong were flat, as Chinese finance ministry officials reiterated fiscal stimulus measures to boost the economy this year.

Stocks in Japan nudged lower, with the yen losing ground versus the U.S. dollar amid weaker-than-expected export data, and after the Bank of Japan held rates steady and left its stimulus program unchanged while cutting its inflation outlook again.

Random Thoughts

The weathervane of regional and global economic growth spun in response to renewed headwinds that have stalled the market’s attempt to reclaim ground lost in last year’s fourth quarter.

As a result, technicians now look for equity indices to undergo a possible retest of the recent near-bear market low. Specific faltering factors include China indicating that its 2018 GDP growth slipped to 6.6% from the 6.9% recorded in 2017. (We forecast further erosion in 2019 to 6.2%.)

Adding to the resistance was the IMF’s recent reduction of its global economic growth forecast. Finally, showing that the U.S. is not impervious to these stiff gusts, existing home sales fell sharply in December to a level not seen in more than three years that also resulted in a 3.5% decline for the full year.

While we project Q4 2018 U.S. GDP growth of 3.2%, we forecast a Q4 2019 read of only 2.3%. Not surprisingly, S&P 500 2019 EPS projections have been reduced from the 10% and 6.5% estimates at the end of Q3 and Q4 2018, respectively, to the current 4.9%. Absent a recession, we still see equity prices tracing out a jagged advance in 2019.