Daily Market Commentary

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Weekly Relative Value

Published at the top of each week by Balance Sheet Solutions, Weekly Relative Value tracks market and economic trends, analyzes key releases and watches ongoing political developments.  

Commentary prepared by Balance Sheet Solutions, LLC, a wholly owned CUSO of Alloya Corporate Federal Credit Union. Balance Sheet Solutions is a leading broker/dealer, investment advisor and ALM risk management consultant to credit unions.

Thursday, March 23, 2017 at 8:00 a.m. CST
Commentary prepared by Tom Slefinger, SVP, Director of Institutional Fixed Income Sales, Registered Representative of ISI*, Balance Sheet Solutions

Market Indications

Other Market Indicators

2s/5s Tsy Spread 0.69 0.00
2s/10s Tsy Spread 1.16 0.00
2s/30s Tsy Spread 1.77 -0.01
DJIA-30 20661.30 -6.71
NASDAQ 5821.64 +27.82
S&P-500 2348.45 +4.43
Dollar Idx 99.69 -0.12
CRB Idx 183.85 -0.43

Today's Market Commentary

Recap – U.S. stocks rebounded after the first 1% decline since October, while havens from Treasuries to the yen remained in demand as investors assessed the prospects for pro-growth policies in America. The S&P 500 Index edged higher, while technology-heavy measures posted solid advances. Banks slipped to an eight-week low after bearing the brunt of Tuesday’s rout. Treasury 10-year yields fell to 2.40%, the yen surged versus all its G-10 peers and gold rose toward $1,250 an ounce. The dollar fell a sixth day, its longest slump since November. New Zealand’s central bank held its benchmark rate steady. The gains in U.S. equities provided a measure of calm to the market, though havens remained in demand a day before a Republican health-care bill is set for a vote in Congress. Lawmakers have signaled any setback could delay enactment of tax cuts and spending increases, the prospects for which have underpinned the rally in risk assets since Donald Trump’s election. The depth of selling Tuesday drew some investors back in on speculation the drop went too far given data showing strength in the global economy.

Trump Talks Changes to Health Bill – The White House is talking with House conservatives about last-minute changes to the embattled GOP health-care bill aimed at wooing enough holdouts to secure House passage. Lawmakers and Trump administration officials are discussing revisions to “essential benefits” requirements in Obamacare, according to members of Congress and a White House official familiar with the discussions. The negotiations dragged late into Wednesday night, and Republicans postponed until Thursday a key procedural step before the bill gets to the floor. Holdouts in the House Freedom Caucus also pushed for changes in Obamacare’s requirements that insurers cover people with pre-existing conditions, but the White House gave them a hard no, according to a White House official.

New Zealand's Central Bank Keeps Policy on Hold – The Reserve Bank of New Zealand held its key interest rate at 1.75% (as expected) and said, “Monetary policy will remain accommodative for a considerable period.”

U.K. Retail Sales Shake Off Brexit Fears – Retail sales climbed 1.4% month-over-month in February and 3.7% year-over-year, data released by the Office for National Statistics showed on Thursday. “The underlying trend suggests that rising petrol prices in particular have had a negative effect on the overall quantity of goods bought over the last three months,” said Kate Davies, a senior statistician at the Office for National Statistics.

Looking at the day ahead, U.S. economic data is light. Initial jobless claims increased by 15,000 to 258,000 in the week ended March 18, a Labor Department report showed this morning. The median forecast called for 240,000. The Labor Department revised the prior week’s reading to 243,000 from an initially reported 241,000. The four-week average for all jobless claims rose to 240,000 from 239,000 in the prior week. The number of people continuing to receive jobless benefits decreased by 39,000 to two million in the week ended March 11. The unemployment rate among people eligible for benefits dropped to 1.4% from 1.5%. New-home sales will cross the wires at 10;00 am ET. Earnings reports trickle out. GameStop, KB Home and Micron will report after markets close.

Market Update – Stock markets around the world are little changed. Japan's Nikkei (+0.2%) eked out a gain in Asia, and Germany's DAX (+0.1%) edges up in Europe. The S&P 500 is set to open unchanged at 2,349. The U.S. 10-year yield is unchanged at 2.41%.

Economic Calendar

March 20 - 24, 2017: The Week Ahead

Future Fed Expectations
Sources: Bloomberg


Select Probabilities based on the Futures

Probability of Fed Funds rate increase on May 3, 2017 13%
Probability of Fed Funds rate increase on June 14, 2017 57%

**All quoted rates are indications and are subject to change without notice.
* ISI is a member of the FINRA/SIPC.

The information contained herein is prepared by ISI Registered Representatives for general circulation and is distributed for general information only. This information does not consider the specific investment objectives, financial situations or particular needs of any specific individual or organization that may receive this report. Neither the information nor any opinion expressed constitutes an offer, or an invitation to make an offer, to buy or sell any securities. All opinions, prices, and yields contained herein are subject to change without notice. Investors should understand that statements regarding future prospects might not be realized. Please contact Balance Sheet Solutions to discuss your specific situation and objectives.