A volatile overnight session in global markets sparked a risk-off bid for Treasuries. Equities sold off on news that Huawei’s CFO was arrested in Canada for extradition to the United States on charges of violating Iran trade sanctions. Market participants are concerned that this may further complicate U.S./China trade negotiations, and at the same time, oil prices plunged overnight on news that there is no OPEC agreement at this point to cut production.  Long-end Treasury yields are now down 20 bps since last Wednesday, and the 2-year note yield is down 8 bps over that timeframe.  As such, the yield curve (2yr/10yr spread) has flattened to as low as 9 bps earlier this week (currently 13 bps).  We discussed the various headwinds affecting market sentiment in our December Market Commentary, including Fed policy and trade worries. Regarding the latter, President Trump often touts stock market performance as an important gauge of his administration’s success, and if equities continue to struggle, it will be worth watching to see if the White House’s tone towards China moderates. A Chinese trade official did express optimism that an agreement would be reached in the next 90 days that would remove all tariffs, which modestly settled market anxiety overnight.    

Jason Haley
Managing Director, Investment Management Group

12/03Markit US Manufacturing PMI55.455.355.4
12/03Construction Spending MoM0.40%-0.10%0.00%-0.10%
12/03ISM Manufacturing57.559.357.7
12/03ISM Employment58.456.8
12/03ISM Prices Paid7060.771.6
12/03ISM New Orders62.157.4
12/03Wards Total Vehicle Sales17.20m17.40m17.50m
12/05MBA Mortgage Applications2.00%5.50%
12/05U.S. Federal Reserve Releases Beige Book
12/05Beige Book Released Live Due to George H W Bush Funeral
12/06Challenger Job Cuts YoY51.50%153.60%
12/06ADP Employment Change195k179k227k225k
12/06Trade Balance-$55.0b-$55.5b-$54.0b-$54.6b
12/06Nonfarm Productivity2.30%2.30%2.20%
12/06Unit Labor Costs1.00%0.90%1.20%
12/06Initial Jobless Claims225k231k234k235k
12/06Continuing Claims1690k1631k1710k1705k
12/06Bloomberg Consumer Comfort60.6
12/06Markit US Services PMI54.454.4
12/06Markit US Composite PMI54.4
12/06ISM Non-Manufacturing Index5960.3
12/06Factory Orders-2.00%0.70%
12/06Factory Orders Ex Trans0.40%
12/06Durable Goods Orders-2.40%-4.40%
12/06Durables Ex Transportation0.10%0.10%
12/06Cap Goods Orders Nondef Ex Air0.00%
12/06Cap Goods Ship Nondef Ex Air0.30%
12/06Household Change in Net Worth$2191b
12/07Change in Nonfarm Payrolls198k250k
12/07Two-Month Payroll Net Revision
12/07Change in Private Payrolls200k246k
12/07Change in Manufact. Payrolls18k32k
12/07Unemployment Rate3.70%3.70%
12/07Underemployment Rate7.40%
12/07Average Hourly Earnings MoM0.30%0.20%
12/07Average Hourly Earnings YoY3.10%3.10%
12/07Average Weekly Hours All Employees34.534.5
12/07Labor Force Participation Rate62.90%62.90%
12/07Wholesale Inventories MoM0.70%0.70%
12/07Wholesale Trade Sales MoM0.20%
12/07U. of Mich. Sentiment9797.5
12/07U. of Mich. Current Conditions112.3
12/07U. of Mich. Expectations88.1
12/07U. of Mich. 1 Yr Inflation2.80%
12/07U. of Mich. 5-10 Yr Inflation2.60%
12/07Consumer Credit$15.000b$10.923b