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.

Friday, May 26, 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 0.48 -0.02
2s/10s Tsy Spread 0.94 -0.02
2s/30s Tsy Spread 1.60 -0.02
DJIA-30 21082.95 +70.53
NASDAQ 6205.26 +42.23
S&P-500 2415.07 +10.68
Dollar Idx 97.36 +0.12
CRB Idx 180.54 -0.60

Today's Market Commentary

Recap – In the U.S., the markets are quite unremarkable with one eye on the long weekend holiday. The only noteworthy news is about oil, where prices fell sharply yesterday in the wake of OPEC and non-OPEC producers agreeing to extend the production cut deal by nine months into 2018. After touching a high of $52.00 per barrel yesterday morning, post the headlines West Texas Intermediate proceeded to tumble and finished the day down -4.79% at $48.90 per barrel and back to the lowest level in a week. It was also the third biggest daily decline this year. This morning it is down again to 48.40 per barrel.

In terms of yesterday’s economic data, in the U.S. the advance goods trade balance reading in April revealed a slightly wider than expected deficit of $67.6 billion. Away from that, initial jobless claims continue to hover at multi-decade lows after printing at 234 thousand for last week. The four-week average is now at 235 thousand. Meanwhile, the Kansas City Fed’s manufacturing activity index for May edged up one point to +8 (vs. +9 expected). The other data was the April wholesale inventories print, which came in at -0.3% month-over-month and will likely result in downward pressure on some of the GDP trackers.

Meanwhile, it was business as usual for U.S. equity markets, despite the energy sector doing its best to weigh on broader indices – the S&P 500 (+0.44%) rose for the sixth consecutive session and in doing so notched up yet another record high. There was a similar lack of excitement in Treasuries yesterday, where yields finished the day little changed after spending much of the session in a tight range.

Elsewhere, President Trump’s overseas tour continues with Trump yesterday causing some ripples at the NATO summit after criticizing allies for “chronic underfunding.” Meanwhile, the travel ban is back in focus overnight after the U.S. attorney general said that the White House will appeal its latest courtroom defeat in the U.S. Supreme Court. Also, worth pointing out is the Washington Post reporting that investigators are now focusing on Trump’s son-in-law and advisor Jared Kushner about the Russia-Election investigation.

Looking at the day ahead, the second estimate of Q1 GDP showed an upward revision in growth to 1.2% from +0.7%. Importantly for growth in the current quarter, the headline April durable goods orders printed -.7%. More importantly, excluding-transportation orders (-0.4% month-over-month) and core capex orders (+0.0% month-over-month) were weaker than forecast. Also, due out this afternoon is the final May University of Michigan consumer sentiment print where it’s worth keeping an eye on the various inflation expectations indicators too.


Economic Calendar

May 22 - 26, 2017: The Week Ahead

Future Fed Expectations
Sources: Bloomberg


Select Probabilities based on the Futures

Probability of Fed Funds rate increase on June 14, 2017 100%
Probability of Fed Funds rate increase on July 26, 2017 95%

**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.