U.S. equities finished mixed, as testimony from Fed Chairman Jerome Powell on Capitol Hill, in which he noted that the current stance is likely to remain appropriate supported sentiment. However, reports that talks surrounding a potential “phase one” agreement between the U.S. and China hit a snag over agriculture purchases took some of the wind out of the bulls’ sails. In equity news, Tech Data agreed to be acquired by affiliates of Apollo Global Management for about $5.4 billion, and Energizer posted upbeat quarterly results and guidance. Treasury yields were lower following consumer price inflation data that suggested pricing pressure remain subdued. The U.S. dollar nudged higher, while gold and crude oil prices also gained ground.
The Dow Jones Industrial Average (DJIA) increased 9 points (0.3%) to 27,780, the S&P 500 Index ticked 2 points (0.1%) higher to 3,094, while the Nasdaq Composite lost 4 points (0.1%) to 8,482. In moderate volume, 798 million shares were traded on the NYSE and 2.1 billion shares changed hands on the Nasdaq. WTI crude oil gained $0.32 to $57.12 per barrel and wholesale gasoline was up $0.03 at $1.64 per gallon. Elsewhere, the Bloomberg gold spot price was $7.44 higher at $1,463.78 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—increased 0.1% to 98.36.
The Consumer Price Index (CPI) rose 0.4% month-over-month (m/m) in October, above the Bloomberg estimate calling for a 0.3% rise, and versus September’s unrevised flat reading. The core rate, which strips out food and energy, was 0.2% higher m/m, matching expectations and compared to September’s unadjusted 0.1% rise. Y/Y, prices were 1.8% higher for the headline rate, above forecasts calling for it to match September’s unadjusted 1.7% increase. The core rate was up 2.3% y/y, below projections to be in line with September’s unadjusted 2.4% gain. The Department of Labor said energy prices accounted for more than half of the increase in the headline figure, while the core rate’s gains were led by medical care and recreation prices. The report also noted that apparel prices fell and the increase in shelter costs was the smallest since October 2013.
The MBA Mortgage Application Index jumped 9.6% last week, following the prior week’s 0.1% dip. The solid gain came as a 12.9% surge in the Refinance Index was met with a 5.1% gain for the Purchase Index. The average 30-year mortgage rate rose 5 basis points (bps) to 4.03%.
Treasuries finished higher, as the yield on the 2-year note decreased 3 bp to 1.63%, while the yields on the 10-year note and the 30-year bond declined 4 bps 1.87% and 2.35%, respectively.
The markets scrutinized today’s address by Federal Reserve Chairman Jerome Powell to the Congressional Joint Economic Committee, which began his two-day economic and monetary policy testimony on Capitol Hill. Powell noted that the current stance of monetary policy is likely to remain appropriate, but “noteworthy risks to this outlook remain.” Powell added that low rates may limit the ability of monetary policy to support economic growth and continued to point out that fiscal policy would be an important support in a downturn.
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