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

Date Event Surv(M) Actual Prior
10/23 Chicago Fed Nat Activity Index -0.13 0.17 -0.31
10/24 Markit US Manufacturing PMI 53.5 53.1
10/24 Markit US Services PMI 55.2 55.3
10/24 Markit US Composite PMI 54.8
10/24 Richmond Fed Manufact. Index 17 19
10/25 MBA Mortgage Applications 3.60%
10/25 Durable Goods Orders 1.00% 2.00%
10/25 Durables Ex Transportation 0.50% 0.50%
10/25 Cap Goods Orders Nondef Ex Air 0.30% 1.10%
10/25 Cap Goods Ship Nondef Ex Air -0.10% 1.10%
10/25 FHFA House Price Index MoM 0.40% 0.20%
10/25 New Home Sales 555k 560k
10/25 New Home Sales MoM -0.90% -3.40%
10/26 Wholesale Inventories MoM 0.40% 0.90%
10/26 Initial Jobless Claims 235k 222k
10/26 Continuing Claims 1895k 1888k
10/26 Advance Goods Trade Balance -$64.0b -$62.9b
10/26 Retail Inventories MoM 0.70%
10/26 Bloomberg Consumer Comfort 51.1
10/26 Pending Home Sales MoM 0.40% -2.60%
10/26 Pending Home Sales NSA YoY -3.10%
10/26 Kansas City Fed Manf. Activity 17 17
10/27 GDP Annualized QoQ 2.50% 3.10%
10/27 Personal Consumption 2.20% 3.30%
10/27 GDP Price Index 1.70% 1.00%
10/27 Core PCE QoQ 1.30% 0.90%
10/27 U. of Mich. Sentiment 100.7 101.1
10/27 U. of Mich. Current Conditions 116.4
10/27 U. of Mich. Expectations 91.3
10/27 U. of Mich. 1 Yr Inflation 2.30%
10/27 U. of Mich. 5-10 Yr Inflation 2.40%