Treasury prices are modestly higher this morning, reversing course from a brief sell-off in the overnight session. The former was attributable to a landslide election victory for Japanese PM Shinzo Abe’s political party, which pushed the yen lower and stocks higher. The better tone in risk markets sparked weakness in U.S. rates before buyers emerged and pressured Treasury yields lower. Japan’s Nikkei index closed up 1.1%, and European equities are mostly higher. S&P 500 futures are currently up 3 points. European investors continue to monitor developments in Spain. Spanish PM Rajoy announced this weekend that he would exercise powers to disband the Catalan government, which led the Catalan leader to call for “mass civil disobedience.”  From a market perspective, this still appears to be a local/regional issue.

Looking ahead, the two primary focus points for U.S. investors are 1) tax reform progress and 2) the White House’s pick for Fed Chair.  Regarding the former, Jerome Powell and Janet Yellen would be expected to have the smallest impact on market pricing (i.e., status quo), and no matter who is chosen, we don’t expect a major shift in current Fed policies.  For tax reform, the House still has to pass a budget resolution to open the door for the larger negotiations, and a long and contentious tax debate will likely follow, both inter- and intra-party.

Jason Haley
Managing Director, Investment Management Group

10/23Chicago Fed Nat Activity Index-0.130.17-0.31
10/24Markit US Manufacturing PMI53.553.1
10/24Markit US Services PMI55.255.3
10/24Markit US Composite PMI54.8
10/24Richmond Fed Manufact. Index1719
10/25MBA Mortgage Applications3.60%
10/25Durable Goods Orders1.00%2.00%
10/25Durables Ex Transportation0.50%0.50%
10/25Cap Goods Orders Nondef Ex Air0.30%1.10%
10/25Cap Goods Ship Nondef Ex Air-0.10%1.10%
10/25FHFA House Price Index MoM0.40%0.20%
10/25New Home Sales555k560k
10/25New Home Sales MoM-0.90%-3.40%
10/26Wholesale Inventories MoM0.40%0.90%
10/26Initial Jobless Claims235k222k
10/26Continuing Claims1895k1888k
10/26Advance Goods Trade Balance-$64.0b-$62.9b
10/26Retail Inventories MoM0.70%
10/26Bloomberg Consumer Comfort51.1
10/26Pending Home Sales MoM0.40%-2.60%
10/26Pending Home Sales NSA YoY-3.10%
10/26Kansas City Fed Manf. Activity1717
10/27GDP Annualized QoQ2.50%3.10%
10/27Personal Consumption2.20%3.30%
10/27GDP Price Index1.70%1.00%
10/27Core PCE QoQ1.30%0.90%
10/27U. of Mich. Sentiment100.7101.1
10/27U. of Mich. Current Conditions116.4
10/27U. of Mich. Expectations91.3
10/27U. of Mich. 1 Yr Inflation2.30%
10/27U. of Mich. 5-10 Yr Inflation2.40%