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Weekly Market Commentary

12.10.18

Mortgages rallied last week as U.S. 10yr treasury yields fell 14bps on the week, the strongest performance since April 2017. The S&P 500 and DOW fell 4.60% and 4.50% for the week on Friday, -2.33% and -2.24% respectively, and are now back in the negative territory for 2018. The 2s5s curve inverted for the first time since 2007 and the 2s10s curve is near 13bps this morning. However, the curve steepened into the end of the week as the market continued to price out the Fed interest rate hikes in 2019. Market expectations are pricing near 50% probability for a March interest rate increase and near certain hike next week.

This week, equity markets will likely continue to dominate much of the focus as investors and managers continue to position ahead of year-end. Internationally, the weekend gave us headlines such as Beijing summoning the U.S. ambassador to protest the arrest of Huawei's CFO (adding pressure to trade talks) and disappointing Japanese GDP data. It seems almost a lifetime away from the optimism that came in last Monday with the G20 US-China trade truce. There was supposed to be a UK vote tomorrow on Mays Brexit Plan, but that now seems to be on hold. There has been talk of revoking Article 50 and a general sense of malaise. In France, Macron is struggling after another weekend of protests and chaos and will address the nation tonight. In US domestic news, we receive Initial Claims Thursday and on Friday we receive Retail Sales, Industrial Production and Capacity Utilization.

Economic Calendar for the week of 12/10/2018 to 12/14/2018:
Monday: JOLTS Job Openings
Tuesday: NFIB Small Business Optimism and PPI
Wednesday: MBA Mortgage Applications, CPI, Real Avg Earnings and Monthly Budget Statement
Thursday: Initial Jobless Claims, Continuing Claims, Import Price Index, Export Price Index and Bloomberg Consumer Comfort Index
Friday: Retail Sales, Industrial Production, Capacity Utilization, Markit US Manufacturing PMI, Markit US Services PMI and Business Inventories

Please Note: The above Market Commentary information is updated weekly.