U.S. equities are pointing to a positive open

Posted: Thursday, July 11, 2019 - 09:38 EDT

U.S. equities are pointing to a positive open as the Fed induced rally continues. Asian markets were fueled higher by the dovish comments by Powell yesterday. Secondary spreads were also about 1-2bps tighter across most sectors following Powell’s testimony and the Bank of Canada’s announcement. The Bank of Canada left rates unchanged at 1.75%, as expected, but discussed trade worries clouding the outlook. However, it seems it will take a more significant deterioration to spark any kind of conversation about easing, despite the Fed seeming poised to cut rates this month. 

U.S. CPI came in at 0.3% in June, above expectations. Core CPI ticked higher at 2.1%. While the Fed has spoken about the risks of a more persistent downside miss to its inflation target as a reason to ease, we believe those risks are tied to their worry that a sustained growth slump is coming, and doesn't rest as much on the existing gap between inflation and the 2% target. As a result, Powell's fairly clear leaning to cutting rates now (from yesterday's testimony) still signals a quarter point cut this month, with today's firmer core reading just one more reason why a 50 bps cut in July is much more unlikely.

Equity Markets:

  Index Level % Change QTD YTD Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019
S&P 500 2,993.07 0.45% 1.82% 20.69% -0.76% 3.43%

7.71%

-13.52% 13.65% 4.30%
TSX

16,563.29

0.11%

1.17%

17.58%

-4.52% 6.77%

-0.56%

-10.11% 13.29% 2.58%

Rates:

 

Today

% Change

QTD change

YTD change

Q1 2018

Q2 2018

Q3 2018

Q4 2018

Q1 2019

Q2 2019

Canada 5 Year

1.53%

-0.03%

0.14%

-0.36% 1.97% 2.07% 2.34% 1.89% 1.52% 1.39%
Canada 10 Year 1.59% 0.00% 0.12% -0.38% 2.09% 2.17% 2.43% 1.97% 1.62% 1.47%
Canada 30 Year 1.76% 0.03% 0.07% -0.43% 2.23% 2.21% 2.42% 2.18% 1.89% 1.69%
30yr Generic Corporate A rated Spread 1.40% 0.00% 0.00% 0.00% 1.24% 1.28% 1.30% 1.50% 1.50% 1.40%
30yr All-in Corporate A rated Yield

3.16%

0.03% 0.07% 0.07% 3.47% 3.45% 3.72% 3.68% 3.39% 3.09%
US 10 Year 2.06% 0.00% 0.06% -0.62% 2.74% 2.86% 3.06% 3.06% 2.69% 2.41%
CDX IG 52.609 0.156                

The information contained herein is intended for advisors for general information only and is compiled from sources believed to be reliable, but no representation or warranty, express or implied, is made as to its accuracy. All opinions contained in the commentary and expressed by the portfolio manager are subject to change without notice and are provided in good faith without legal responsibility. All market data is sourced from Bloomberg.