December 29th, 2017
Sparse trading desks led to lower trading volumes in this holiday shortened week. Bond prices closed higher when trading ended at 2:00 p.m. ET. The Fannie Mae 30-yr 3.5% coupon ended at 102.72, +19bp and above both resistance levels at the 25- and 50-day Moving Averages. Stocks are modestly lower and close normal time at 4:00 p.m. ET. If you read this morning's Daily Market Update, you will see the huge gains seen in the U.S. equity markets in 2017. The 10-yr yield is finishing the year at 2.41%. WTI oil was last seen at $60.27/barrel. We'll get right back into the swing of things on Tuesday with a full economic calendar that ends on Friday with the December Jobs Report. And from all of us here at Vantage Production, Happy New Year!
Late Morning Review
Smile! You’re a winner. In a year when the S&P 500 reached new records on a regular basis, the best-performing stock is a relatively small provider of dental products, Bloomberg News is reporting. The maker of Invisalign, Align Technology Inc., is on pace to post a 136 percent increase in 2017. While Align Technology remains tiny within the S&P 500, sales have almost doubled in just three years with an estimated revenue of $1.49 billion.
President Trump is renewing calls for the U.S. Postal Service to jack up rates on Amazon package deliveries to the doorsteps of residences and businesses. Analysts estimate that the USPS delivered about 40 percent of Amazon’s shipping volume in 2015 at a fraction of the cost Amazon would have paid to other carriers like UPS or FedEx. For more than a decade, the USPS has delivered net losses in the billions consecutively each year. Despite efforts that trimmed $14 billion in costs annually, the self-funded carrier of 47 percent of the world’s mail continues to struggle financially.
U.S. oil prices hit mid-2015 levels on the final trading day of 2017. WTI crude futures were at $60.07/barrel this morning, up 23 cents from their last close. Reports cite an unexpected decrease in American output, fears of a cold spell that will hamper output efforts, and a fall in commercial crude inventories as reasons for the increase.
Bond markets close at 2 p.m. ET time today. Markets are closed Monday in observance of New Year’s
The last week of 2017 has officially come to a close. The Fannie Mae 30-yr 3.5% coupon didn’t see much action today, closing at 102.56, down -6 bp. Stock gains were modest with the Dow closing at 24813.24, up 38.94, the NASDAQ at 6943.04, up 3.70, and the S&P at 2684.47, up 1.85. WTI oil was up .06 to 59.61/barrel. The 10-yr T Note closed at 2.4305 percent. Markets are closed Monday, January 1, 2018 in observance of New Year's Day. Have a safe and happy New Year!
Late Morning Review
While 2017 was swamped with devastating weather-related headlines, the year was one shy of the record books. The country recorded 15 severe weather events costing $1 billion or more each through early October, one short of the record 16 in 2011, according to the federal government’s National Centers for Environmental Information. This tally doesn’t include the terrible wildfires in southern California. Among the most devastating events, as expected, were hurricanes Harvey, Irma and Maria and wildfires in northern California. The killer storms caused economic losses of more than $210 billion in the U.S. and across the Caribbean, and about $100 billion in insured damages.
The number of Americans filing for initial unemployment benefits was 245,000 during the week that ended Dec. 23, according to seasonally adjusted figures published by the Labor Department. Filing trends remain consistent with a tightening labor market. Since mid-October, claims have held within a range of 223,000 to 252,000.
The Chicago PMI rose to 67.6 in December from 63.9, finishing 2017 at the highest level in six years. The index measures how well the economy in the Chicago region is performing. Any reading over 50 indicates improving conditions, and numbers above 60 are exceptional. The amount of goods and services produced in the Chicago region hit a 34-year high. The Chicago PMI is the latest indicator that the U.S. economy is closing the books on 2017 and entering 2018 on solid footing.
The Fannie Mae 30-yr 3.5% coupon gained some traction today, closing at 102.62, up 31 bp. All major Stock indices had an uptick with the Dow closing at 24774.30, up 28.09, the NASDAQ at 6939.34, up 3.09, and the S&P at 2681.17, up 0.67. In a reversal of fortune from yesterday, WTI oil was down -0.23 today to 59.53/barrel. The 10-yr T Note closed at 2.412 percent. As usual, weekly Initial Jobless Claims will be released tomorrow.
Late Morning Review
Pending home sales squeaked out a minor gain in November on a monthly and annualized basis, according to the National Association of REALTORS® (NAR). The Pending Home Sales Index, a forward-looking indicator based on contract signings, rose 0.2 percent to 109.5 in November from 109.3 in October. The index remains at its highest reading since June (110.0), and is now 0.8 percent above 2016. The 3.4-month supply of existing homes for sale on the market is the lowest since NAR began tracking inventory in 1999. A 6-month supply is considered normal. Heading into 2018, existing-home sales and price growth are forecast to slow, primarily because of the altered tax benefits of homeownership affecting some high-cost areas.
Consumer Confidence retreated in December after reaching a 17-year high in November. The Consumer Confidence Survey® monthly report reflects prevailing business conditions and likely developments for the months ahead and details consumer attitudes and buying intentions. The decline was fueled by a less optimistic outlook for business and job prospects in the coming months. Despite the decline in confidence, consumers’ expectations remain at historically strong levels, suggesting economic growth will continue well into 2018.
And now for how the “other half” lives. The world’s wealthiest became $1 trillion richer in 2017 with a 23 percent increase in fortunes from 2016, bringing their cumulative total to $5.3 trillion. That’s according to the Bloomberg Billionaires Index, a daily ranking of the world’s 500 richest people. The increase was more than four times last year’s gain. Amazon.com Inc. founder Jeff Bezos added the most in 2017, a $34,2 billion gain that knocked Microsoft Corp. co-founder Bill Gates out of his spot as the world’s richest person, which he’s held since May 2013. The U.S. has the largest presence on the index with 159 billionaires. China has 38 billionaires on the index, a 65 percent increase that marks the biggest gain of the 49 countries represented. Tech moguls number 57 billionaires on the index, the most of any sector.
Markets were back in business today after being closed Monday in observance of the Christmas holiday. The Fannie Mae 30-yr 3.5% coupon continued its sideways trading pattern, closing relatively unchanged at 102.31, only gaining 3 bp. All major Stock indices experienced losses today with the Dow closing at 24734.40, down -19.66, the NASDAQ at 6934.68, down -25.28, and the S&P at 2680.34, down -3.00. WTI oil was up 1.31 to 59.78/barrel. The 10-yr T Note closed at 2.468 percent. Tomorrow’s economic releases include Consumer Confidence and Pending Home Sales.
Late Morning Review
Retailers unwrapped the gift of great sales this holiday season, according to initial reports by Mastercard SpendingPulse, which tracks in-store and online purchases. Fueled by high consumer confidence and a robust job market, U.S. retail sales, excluding automobiles, rose 4.9 percent from Nov. 1 through Christmas Eve, compared with a 3.7 percent gain last year. This was the fastest pace since 2011. Online sales continued to shine, rising 18.1 percent.
Siri, in the holiday hubbub, how are consumers feeling about the iPhone X? This seems to be the question as lackluster demand for the latest Apple release does not meet expectations. Apple reportedly cut its production forecast in 1st Quarter 2018 by 20 million units for its latest device with a price tag of $1,000 for the base model. Analysts are mixed in their interpretation of the tech, some stating a lack of innovation doesn’t justify the cost, while others foresee greater sales ahead mid-year. Although shares prices of Apple and its suppliers were hit by the reports today, Apple is still poised for a $1 trillion valuation.
Home prices continued to rise across the country in October. Today, the S&P/CoreLogic Case-Shiller 20-City Composite posted a 6.4 percent year-over-year gain, up from 6.2 percent in September. Seattle, Las Vegas, and San Diego reported the highest year-over-year gains among the 20 cities. In October, Seattle led the way at 12.7 percent, followed by Las Vegas at a 10.2 percent increase, and San Diego at 8.1 percent. Nine cities reported greater price increases in the year ending October 2017 versus the year ending September 2017.