US Economy and Credit Markets Ended Dec. 16, 2016
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Treasury prices dropped significantly over the course of the week as the Federal Reserve initiated the first rate hike since last December and second since 2006. Treasuries dropped on Monday and Tuesday with expectations that the Fed may be more aggressive on interest rates and on rising crude oil prices. On Wednesday the Fed announced that it would raise the Federal Funds Target Rate upper bound from 0.50 to 0.75. The rate hike was widely expected as the market implied probability of a rate hike was 100%. However, Treasury prices still dropped moderately after the announcement on Wednesday as the Fed increased the number of expected rate hikes in 2017 from two to three. Though many expected more optimistic comments on the future of the economy from the Fed due to President-Elect Donald Trump's policies, the comments were neutral with the views of the members being mixed. Treasury prices were little changed to close out the week on Thursday and Friday while crude oil dropped from a high on Tuesday to end the week flat. Major economic reports (and related consensus forecasts) for the upcoming week include: Monday: December Preliminary Markit US Services PMI (55.2); Wednesday: December 16 MBA Mortgage Applications, November Existing Home Sales (-1.8% MoM); Thursday: 3Q Annualized GDP (3.3%), 3Q GDP Price Index (1.4%), 3Q Personal Consumption (2.8%), November Preliminary Durable Goods Orders (-4.0%), December 17th Initial Jobless Claims (259,000), November Personal Income (0.3%), November Personal Spending (0.3%), November Leading Index (0.2%); Friday: November New Home Sales (2.1% MoM), December Final U. Of Michigan Sentiment (98.0).

Posted on Monday, December 19, 2016 @ 8:03 AM

These posts were prepared by First Trust Advisors L.P., and reflect the current opinion of the authors. They are based upon sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security.