Tuesday September 27

Stocks rallied today in spite of a significant drop in oil prices. The S&P 500 rose 0.6% to 2,159 and the Dow Jones fell 0.7% to 18,228. The KBW Bank index outperformed rising 1% while utilities fell 1% which seems counterintuitive considering that rates rallied. Economic data today showed that consumer confidence was significantly higher than expected as a result of strong consumer spending. The reading showed that consumer confidence came in at 104.1 compared to the estimated 98.8. Some analysts are attributing today’s gains a result of a perceived Clinton victory in last night’s debate. The Mexican peso is indicative of the market’s expectation for a Trump victory. Given the nature of Trump’s campaign, as it gets more likely that he will win the peso will depreciate to be more competitive with USD. The opposite occurred today after the debate as the peso rallied 2.5% against the dollar to 19.386. Rates rallied in the US today as the bull flattening continued. The 2 year yield was unchanged at 0.74%. The 10 year yield fell 2bp to 1.56%. USD rose 0.3% against EUR to $1.1218. USD was relatively flat against JPY at Y100.37. USD fell 0.3% against GBP to $1.3013.

According to reports Opec is going to discuss the possibility of cutting oil production by nearly 1mm barrels per day for a one year time span. Saudi Arabia would bear the brunt of the cuts at 400k b/d, and Iran would have to freeze production at a level that is just above the amount it produced  in August. Saudi Arabia is currently producing at a record amount whereas Iran is still ramping up production coming off of sanctions. Analysts don’t expect that anything between the two will be finalized tomorrow, however maybe Opec can lay the groundwork for a future agreement. This would be the first time the group came to an agreement on how to combat the fundamental shift that has become apparent in oil markets. A representative of Iran commented that the country has no plans to limit production at the time. This is a drastic endeavor for the organization, and is intended to bring prices back to more acceptable levels for Opec countries. Oil prices have not responded as expected to this story, as WTI was down more than 3% at midday to $44.40.
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Tuesday September 27

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