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.

Wednesday, February 22, 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 0.68 -0.03
2s/10s Tsy Spread 1.18 -0.04
2s/30s Tsy Spread 1.79 -0.05
DJIA-30 20743.00 +118.95
NASDAQ 5865.95 +27.37
S&P-500 2365.38 +14.22
Dollar Idx 100.95 +0.48
CRB Idx 191.94 -0.11

Today's Market Commentary

Recap – U.S. stocks rose to records as retailer results topped estimates, while the dollar resumed its advance amid fresh signs global growth has started to accelerate. Mexico’s peso rallied after the central bank signaled support. The S&P 500 Index rose after results from Wal-Mart Stores Inc. and Home Depot Inc. bolstered confidence the American consumer can stoke growth. European equities advanced after readings on euro-area manufacturing topped estimates. The dollar climbed on speculation rates could rise as soon as next month. It pared gains in afternoon trading as the peso soared after the central bank said it will bolster the currency without draining international reserves. The S&P 500 climbed 0.6% to a record 2,365.28 at 4:00 pm in New York, its ninth gain in the past 10 sessions. The Dow Jones Industrial Average, the Nasdaq Composite Index and the Russell 2000 Index also closed at all-time highs. Real-estate and utility shares rose the most as Treasury yields advanced. The yield on 10-year Treasuries rose one basis point to 2.43% after earlier adding four basis points to 2.46%.

Elsewhere, in the commodity space, U.S. natural gas extended its decline into a third day due to forecasts for warmer-than-normal weather across the east coast. Futures fell 9.5% to $2.564 per million British thermal units. Oil advanced as Citigroup Inc. raised its short-term price outlook, citing good OPEC compliance with its output-cut agreement and growing demand in Asia. West Texas Intermediate gained 1.2% to settle at $54.09 a barrel and Brent added 0.9%. Gold declined 0.1% to $1,237.80 an ounce.

Fed minutes are coming. The minutes from the January 31/February 1 Federal Open Market Committee meeting will be released at 2:00 pm ET. Traders will be on the lookout for any hints the Fed may give as to when the next interest-rate hike may occur. The market sees a 38% chance the next hike happens in May (World Interest Rate Probability data provided by Bloomberg).

China's housing market is starting to cool. Home prices in China edged up 0.2% in January and have now decelerated in four consecutive months, according to China's National Bureau of Statistics. Annually, price gains slowed to 12.2% from 12.4% in December.

The U.K. economy grew faster than previously thought. The U.K. economy grew at a 0.7% in the fourth quarter of 2016, according to the second reading released by the Office for National Statistics. That was ahead of the 0.6% growth that was released in January.

Stock markets around the world are higher. Hong Kong's Hang Seng (+1%) led the gains in Asia, and Germany's DAX (+0.2%) is out front in Europe. The S&P 500 is set to open little changed near 2,360. The U.S. 10-year yield is down one basis point at 2.42%.

Looking at the day ahead. U.S. economic data is light. Existing-home sales will be released at 10:00 am ET. Earnings reports keep coming. TJX reports ahead of the opening bell, while Cheesecake Factory, Fitbit, HP, Sturm Ruger and Tesla release their quarterly results after markets close.


Economic Calendar

February 21 - 24, 2017: The Week Ahead

Future Fed Expectations
Sources: Bloomberg

Select Probabilities based on the Futures

Probability of Fed Funds rate increase on March 15, 2017 40%
Probability of Fed Funds rate increase on May 3, 2017 50%

**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.