Market Insights 5/16/2019

U.S. equities finished higher for a third-straight day, continuing to pare the large losses seen last week and Monday, with trade concerns continuing to ease and following some upbeat earnings and economic data. .

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

The Markets…

The Dow Jones Industrial Average rose 215 points (0.8%) to 25,863

The S&P 500 Index increased 25 points (0.9%) to 2,876

The Nasdaq Composite gained 76 points (1.0%) to 7,898

In moderate volume, 759 million shares were traded on the NYSE and 2.1 billion shares changed hands on the Nasdaq

WTI crude oil gained $0.85 to $62.87 per barrel and wholesale gasoline was $0.05 higher at $2.06 per gallon

The Bloomberg gold spot price decreased $9.48 to $1,287.01 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.3% higher at 97.86

Housing construction activity stronger than expected, jobless claims drop

Housing starts for April rose 5.7% month-over-month to an annual pace of 1,235,000 units, above the Bloomberg forecast of 1,209,000 units. March starts were revised higher to an annual pace of 1,168,000. Building permits, one of the leading indicators tracked by the Conference Board as it is a gauge of future construction, increased 0.6% m/m to an annual rate of 1,296,000, versus expectations of a 1,289,000 pace, and compared to March’s upwardly-revised 1,288,000 rate. Starts rose for both single-unit and multi-unit structures, while a jump in multi-unit structures boosted permits, overshadowing a decline in single-unit authorizations.

Weekly initial jobless claims fell 16,000 to 212,000, compared to estimates of 220,000, with the prior week’s figure being unrevised at 228,000. The four-week moving average increased by 4,750 to 225,000, while continuing claims dropped by 28,000 to 1,660,000, south of estimates of 1,673,000.

Treasuries were lower, as the yields on the 2-year and 10-year notes increased 2 bps to 2.18% and 2.39%, respectively, and the 30-year bond rate gained 1 bp to 2.84%. Bond yields have recovered from a recent drop and the U.S. Dollar Index was higher, while the stock markets continue to chip away at Monday’s selloff.

The week’s economic calendar will close out tomorrow on the light side, with the Index of Leading Economic Indicators (LEI) forecasted to have increased 0.2% m/m during May following the 0.4% m/m rise in March, as well as the preliminary University of Michigan Consumer Sentiment Index for May expected to post a level of 97.5, a slight uptick from the 97.2 registered in April.

Europe higher, Asia mixed as trade concerns continue to cool

European equities finished higher, with worries of the escalation of the trade war between the U.S. and China, which led to last week’s and Monday’s global market selloffs, continuing to ease a bit as talks are supposed to resume later this month. Also, trade uneasiness was also cooled by reports that the U.S. in planning on delaying imposing tariffs on auto imports. The earnings front out of the U.S. appeared to set a positive tone across the pond and seemed to carry over to this side. The euro was lower versus the U.S. dollar and the British pound declined amid resurfacing Brexit uncertainty. Bond yields in the region were mostly lower.

Stocks in Asia finished mixed with the global markets continuing to be focused on escalated trade tensions between the U.S and China, though concerns have eased a bit as reports suggest that the U.S. could postpone tariffs on auto imports and trade talks are expected to resume at the end of the month. Additionally, the markets are digesting the latest developments, with U.S. President Donald Trump signing an executive order giving the Commerce Department authority to ban telecommunications network gear and services from foreign adversaries.

Stocks in Japan declined, with the yen choppy after yesterday’s rise, and South Korean equities fell. However, shares in mainland China rose and those traded in Hong Kong finished little changed. Australian securities advanced, with the nation posting stronger-than-expected employment growth in April, and markets in India moved higher, despite likely caution ahead of next week’s national election results and as the nation’s exports ticked higher last month.