Thursday October 13

Stocks sold off on global growth concerns as economic data out of China disappointed. The S&P 500 fell 0.3% to 2,132 and the Dow Jones lost 0.3% to 18,098. Both indices recovered from heavier losses earlier in the session, and the S&P 500 initially touched a low of 2,114. Economic data today showed that jobless claims continued to reflect a strong labor market, coming in below expectations and the prior week was revised downward as well. Additionally an index of import prices fell 1.1% from the prior year which reflects the strength of the dollar. In the global landscape economic data out of China raised concerns about global growth prospects and renewed concerns about a slowdown there. Data showed that exports fell 10.0% from the prior year, compared to estimates which called for just a 3.3% decline. This raises concerns about global demand, as well as the health of China’s exporters. On that backdrop rates in the US rallied possibly due to flight to quality and expectations that the Fed may take more of a dovish stance if China becomes a big concern again. The two year yield fell 3bp to 0.83% and the ten year yield lost 4bp to 1.74%. Accordingly 2yr vs 10yr bull flattened 1bp to 90bps. In FX markets the dollar weakened across the board possibly indicative of more dovish Fed expectations. USD lost 0.4% against EUR to $1.1056. USD fell 0.5% against JPY to Y103.71. USD lost 0.4% against GBP to $1.2254. Oil prices rose modestly in spite of the China data. WTI rose 0.7% to $50.55 and Brent added 0.4% to $52.03. The market for Fed funds futures continues to reflect roughly a 65% chance that the FOMC will raise rates before the end of the year.

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Thursday October 13

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