U.S. stocks pared gains but added to yesterday’s solid rally, with lingering trade optimism helping lift the global markets, while a cooler-than-expected read on inflation seemed to keep Fed concerns in check. However, uncertainty remained whether a tentative deal to avert a government shutdown will be signed by President Donald Trump, the earnings front painted a mixed picture, the U.S. dollar resumed a recent run, and Europe delivered another dose of disappointing economic data. Crude oil prices rose with the trade optimism, Venezuela turmoil and recent reports of further supply cuts by Saudi Arabia likely overshadowing a much larger-than-expected build in oil inventories. Treasury yields nudged higher and gold declined.
The Dow Jones Industrial Average (DJIA) rose 118 points (0.5%) to 25,543, the S&P 500 Index gained 8 points (0.3%) to 2,753, and the NASDAQ Composite added 6 points (0.1%) to 7,420. In moderate volume, 820 million shares were traded on the NYSE and 2.1 billion shares changed hands on the NASDAQ. WTI crude oil advanced $0.80 to $53.90 per barrel and wholesale gasoline was up $0.04 to $1.47 per gallon. Elsewhere, the Bloomberg gold spot price decreased $4.98 to $1,305.81 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—rose 0.5% at 97.16.
The Consumer Price Index (CPI) was unchanged month-over-month (m/m) in January, below the Bloomberg estimate of a 0.1% rise, and matching December’s upwardly-revised figure. The core rate, which strips out food and energy, was 0.2% higher m/m, matching expectations and December’s unrevised gain. Y/Y, prices were 1.6% higher for the headline rate, north of forecasts of a 1.5% rise and south of December’s unrevised 1.9% increase. The core rate was up 2.2% y/y, versus projections of a 2.1% gain and in line with December’s unadjusted increase.
The MBA Mortgage Application Index fell 3.7% last week, following the prior week’s 2.5% decline. The decrease came as a 0.1% dip in the Refinance Index added to a 6.1% decline for the Purchase Index. The average 30-year mortgage rate fell 4 basis points (bps) to 4.65%.
Treasuries dipped despite the inflation data, with the yield on the 2-year note rising 3 bps to 2.53% and the yield on the 10-year note ticking 1 bp higher to 2.70%, while the 30-year bond rate was little changed at 3.03%. Bond yields were higher and the U.S. dollar extended a recent run. The House of Representatives could vote on a spending deal to avert a second partial government shutdown as early as tonight, reports suggest. Congressional negotiators reached a tentative deal on Monday to avoid another shutdown, although mixed signals are being sent as to what level of support it will receive from U.S. lawmakers and President Trump.
©2019 Charles Schwab & Co., Inc., Member SIPC. All rights reserved.
Schwab Center for Financial Research (“SCFR”) is a division of Charles Schwab & Co., Inc. The information contained herein is obtained from third-party sources and believed to be reliable, but its accuracy or completeness is not guaranteed. This report is for informational purposes only and is not a solicitation, or a recommendation that any particular investor should purchase or sell any particular security. The investment information mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision. All expressions of opinions are subject to change without notice in reaction to shifting market conditions.