U.S. stocks are mostly higher in early action, following an upwardly-revised Q3 GDP reading and amid signs of progress of tax reform. The markets continue to shrug off flared-up North Korean tensions and are awaiting an economic outlook from Fed Chief Yellen, along with tomorrow’s OPEC meeting and some key data out of China and Japan. Treasury yields are gaining ground and the U.S. dollar is ticking higher. Crude oil prices are extending weekly losses ahead of the OPEC meeting and gold is lower. Asia finished mixed and Europe is mostly higher.
As of 8:52 a.m. ET, the December S&P 500 Index future is 1 point above fair value and the DJIA future is 68 points above fair value, while the Nasdaq 100 Index future is 10 points south of fair value. WTI crude oil is decreasing $0.26 to $57.73 per barrel and Brent crude oil is down $0.24 to $63.00 per barrel. The Bloomberg gold spot price is trading $5.71 lower at $1,288.27 per ounce. Elsewhere, the Dollar Index—a comparison of the U.S. dollar to six major world currencies—is ticking 0.1% higher to 93.36.
The second look (of three) at Q3 Gross Domestic Product, the broadest measure of economic output, showed a quarter-over-quarter (q/q) annualized rate of growth of 3.3%, up from the first release’s 3.0% gain. The Bloomberg forecast called for an adjusted 3.2% pace of expansion. Q2 GDP grew by an unrevised 3.1% rate. Personal consumption came in at a 2.3% gain for Q3, lower than the preliminary estimate of a 2.4% increase, and compared to the expectations of a 2.5% increase. Personal consumption grew by an unrevised 3.3% in Q2.
On inflation, the GDP Price Index was revised to a 2.1% increase, versus expectations of an unrevised 2.2% gain, while the core PCE Index, which excludes food and energy, was adjusted to a 1.4% increase, compared to forecasts of an unrevised 1.3% rise.
The MBA Mortgage Application Index declined 3.1% last week, following the prior week’s 0.1% gain. The decrease came as a 7.7% drop in the Refinance Index more than overshadowed a 1.8% increase in the Purchase Index. The average 30-year mortgage rate remained at 4.20%.Today the Fed will garner attention as Chairwoman Janet Yellen is expected to deliver her U.S. economic outlook to the Joint Economic Committee of Congress at about 10:00 a.m. ET. Per the release of her prepared remarks ahead of the address, Yellen noted the economic expansion is increasingly broad-based and she continues to expect gradual adjustments in the stance of monetary policy. However, she pointed out that although recent lower readings on inflation likely reflect transitory factors, it is possible that this year’s low inflation could reflect something more persistent.
Treasuries are lower, with the yield on the 2-year note ticking 1 basis point (bp) higher to 1.76%, the yield on the 10-year note gaining 4 bps to 2.37%, and the 30-year bond rate rising 5 bps to 2.81%.
The yield curve is steepening somewhat after a recent bout of flattening that appeared to foster some market weariness, while the U.S. dollar is little changed after rebounding the past two days from a pullback as of late.
Schwab Center for Financial Research – Market Analysis Group
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