Morning Market Update: July 19, 2018

Volatile Trading Leaves Equities Mixed and the Yield Curve Steeper

Commentary for Wednesday: Treasurys mostly sold off with the curve steeper while equities ended mixed as more companies released second quarter earnings. Yields were initially higher in quiet overnight trading but shifted lower in the early morning. They hovered at their lowest levels following economic data that reported weaker-than-expected housing starts. However, yields trended higher the remainder of the trading session following an uneventful testimony from Jerome Powell and the Fed's release of its Beige Book. 

This Morning: Treasury yields are trending higher following strong economic data that reported a decrease in initial jobless claims.

The Federal Reserve reported in its Beige Book that economic activity “continued to expand across the United States, with 10 of the 12 Federal Reserve Districts reporting moderate or modest growth.” Manufacturers in all Districts expressed concern about tariffs, and many Districts reported higher prices and supply disruptions that they attributed to the new trade policies. Respondents reported tight labor markets and many said that the inability to find workers constrained growth. Most Districts reiterated difficulty finding qualified workers for open positions, particularly truck drivers, engineers, specialized construction workers, manufacturing workers, and IT professionals.

Housing starts dropped 12.3% to an annual rate of 1.17 million in June versus expectations of only a 2.2% decrease. The unexpected decline was mostly driven by multi-family units which fell 20.2% pushing the year-over-year growth down to -15.3%. Single-family units fell 9.1% month-over-month or 0.2% from one year ago. Regional data reported that the Midwest fell the most, declining 35.8% from the prior month. The Northeast fell 6.8%, the South decreased 9.1%, and the West slipped 3.0%.

Financial Markets Research


The morning market update is provided by: 

SolutionsHeadshots_Hotchkiss_smJames Hotchkiss Director, Member Strategy and Solutions

SolutionsHeadshots_Deven_smMelissa Deven
Director, Member Strategy and Solutions


The data and valuations provided in this document are for information purposes only and are provided as an accommodation and without charge. The Federal Home Loan Bank of Chicago makes no representations or warranties about the accuracy or suitability of any information in this document. This document is not intended to constitute legal, investment, or financial advice or the rendering of legal, consulting, or other professional services of any kind.

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