April 12, 2017

Stocks opened lower again this morning, in what has become a familiar pattern. We’ll see if (like yesterday) most of the downside is reversed by the end of the session. At the moment, the Dow is down 50 pts and the SPX is down .44%. Consumer staples and utilities, the most defensive sectors, are trading higher. The worst-performing groups are the transports, banks and small-caps. In fact, the banks are now negative for 2017. The VIX Index is now up around 15.6, but VIX May futures are trading down around 14.7. The dollar is lower as one might expect; commodities are mostly higher. WTI crude oil ($53.40/barrel) is being propped up by rumors that Russia and Saudi Arabia are keen on keeping a lid on OPEC oil production. Bonds are trading higher again, with yields lower. The 10-year Treasury yield is down to 1.82%. It looks poised to test support at 1.80%.

Inflation on imported goods decelerated a bit in March to 4.2% y/y, mostly due to a temporary dip in energy (oil) prices. Prices on imported consumer goods are still basically flat year-over-year. Prices on goods imported from China are down 1.2% y/y. On the other hand, inflation on exported goods accelerated to 3.6% y/y. Export prices, which declined quite a lot in 2014-2015, have been trending steadily upward for a year now. One bright spot is that prices of agricultural exports are up over 5% y/y. Here’s the takeaway: the deflationary environment we saw in 2014 & 2015 is over, and so is the strong-dollar headwind for US companies exporting overseas. 

According to the Mortgage Bankers Association, the average 30-year fixed mortgage rate is hovering around 4.28%. That’s down from 4.46% a month ago. Separately, Bankrate.com says the average rate is now 3.91%, down from a high of 4.19% a month ago. Either way, rates are falling. 

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