Market Insights 1/16/2020

U.S. equities finished higher, tacking onto a recent run, courtesy of global trade optimism following yesterday’s signing of a “phase one” U.S.-China agreement and today’s passing of the U.S., Mexico Canada trade agreement (USMCA) by the U.S. Senate.

Upbeat economic data also added to sentiment, as retail sales rose solidly, jobless claims dropped and regional manufacturing activity jumped.

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

The Markets…

The Dow Jones Industrial Average was up 267 points (0.9%) to 29,298

The S&P 500 Index rose 28 points (0.8%) to 3,317

The Nasdaq Composite advanced 98 points (1.1%) to 9,357

In moderate volume, 827 million shares were traded on the NYSE and 2.3 billion shares changed hands on the Nasdaq

WTI crude oil gained $0.71 to $58.52 per barrel and wholesale gasoline increased $0.02 to $1.66 per gallon

The Bloomberg gold spot price fell $3.21 to $1,553.04 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—shed 0.1% to 97.31

Retail sales rise, jobless claims drop, and regional manufacturing jumps

Advance retail sales for December rose 0.3% month-over-month, matching the Bloomberg forecast and November’s upwardly-revised gain. Last month’s sales ex-autos moved 0.7% higher m/m, compared to expectations of a 0.5% gain and November’s negatively-revised flat reading. Sales ex-autos and gas rose 0.5% m/m, compared to estimates of a 0.4% gain, and November’s flat reading was adjusted to a 0.2% decline.

Weekly initial jobless claims fell by 10,000 to 204,000, versus estimates of 218,000, with the prior week’s figure being unrevised at 214,000. The four-week moving average dropped by 7,750 to 216,250, while continuing claims declined by 37,000 to 1,767,000, north of estimates of 1,750,000.

The Philly Fed Manufacturing Index in January jumped to 17.0, from the upwardly-revised 2.4 level posted the month prior, versus expectations of a rise to 3.8, moving further into expansion territory (a reading above zero). Growth in new orders, shipments and employment all accelerated in January.

Treasuries were lower, as the yields on the 2-year and 10-year notes rose 2 basis points to 1.57% and 1.81%, respectively, while the 30-year bond rate ticked 1 bp higher to 2.26%.

The week’s economic calendar will culminate tomorrow with housing starts and building permits, forecasted to show starts fell 3.2% m/m during December to an annual rate of 1,375,000 units and permits lost 1.9% m/m to a pace of 1,468,000 units, as well as the Federal Reserve’s industrial production and capacity utilization reports, with economists projecting a 0.2% m/m decline in production and for utilization to move slightly lower to 77.1%.

The preliminary January University of Michigan Consumer Sentiment Index will round out the docket, expected to remain at December’s final reading of 99.3.

Europe mixed on data and trade, Asia mostly higher

European equities were mixed, with the global markets remaining buoyed by continued easing of trade concerns after yesterday’s signing of a “phase one” U.S.-China agreement and as the U.S. Senate voted to pass the U.S., Mexico, Canada trade agreement (USMCA), sending it to President Donald Trump’s desk for his signature.

The euro dipped versus the U.S. dollar, despite data showing the region’s new car registrations jumped last month, and bond yields in the region were mixed. The British pound recovered slightly from recent pressure that had increased amid speculation that the Bank of England may announce a rate cut later this month.

The U.K. FTSE 100 Index was down 0.4% and Germany’s DAX Index was little changed, while Switzerland’s Swiss Market Index rose 0.2%, France’s CAC-40 Index ticked 0.1% higher, Spain’s IBEX 35 Index increased 0.6% and Italy’s FTSE MIB Index rose 0.7%.

Stocks in Asia finished mostly to the upside on the heels of yesterday’s signing of a “phase one” trade deal by the U.S. and China, which helped keep sentiment buoyed, while the markets digested some data in the region and abroad as earnings season heats up in the U.S.

Japan’s Nikkei 225 Index ticked 0.1% higher, with the yen dipping despite data showing the nation’s core machine orders—a gauge of capital spending—rose at a much stronger-than-expected rate in November.

South Korea’s Kospi Index gained 0.8% and Australia’s S&P/ASX 200 Index moved 0.7% to the upside, and India’s S&P BSE Sensex 30 Index ticked 0.1% higher.

The Hong Kong Hang Seng Index advanced 0.4% though China’s Shanghai Composite Index declined 0.5%.