Thursday, 21 March 2019

Global equities continued their march higher despite ongoing trade discussions and geopolitical uncertainty.

The S&P 500 edged lower leading up to the FOMC meeting announcement on Wednesday, posting sharp gains on Thursday as the Fed left rates unchanged and indicated that there would be no hikes in 2019. Financials ended the week in the red after the announcement as the outlook on their interest received on loans grew dimmer. Technology stocks led on strong earnings from chipmaker Micron Technology and an announcement by Google parent, Alphabet, about a video game streaming service as the company seeks to further leverage its cloud capabilities. A nearly 10 million-barrel drawdown in crude inventories pushed WTI crude over $60 per barrel for the first time since last November and closed at $59.87, lifting Energy stocks almost 3%.

In reaction to the FOMC announcement, yields for US Treasuries dropped. The yield on the 10-year US Treasury note fell to 2.54% and the yield on the 30-year bond fell to 2.97% from 3.04%.

In addition to the outlook on the path of interest rates, the Fed gave insight into its plans on end quantitative tightening which is now set to end in September. The Treasury run-off will drop to $15 billion from $30 billion in May, and after September, maturing mortgage-backed securities will be reinvested into Treasuries. March's Housing Market Index fell short of expectations remaining flat to last month's reading, but could see a boost next month as buyers look for mortgage rates to drop in step with long-term Treasuries. The Philadelphia Fed Business Outlook for March was well above consensus, reversing a decline from February, with strength in unfilled orders, shipments, and hiring helping to overcome weakness in new orders. Leading indicators for February were slightly above consensus due to a strong stock market and consumer expectations; however the factory workweek and rise in unemployment claims weighed on the report. Jobless claims last week were 221,000, leading the 4-week moving average to rise to 224,000, in line with the Fed's claims of a strong labor market.

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