U.S. Stocks End Winning Streak; Dollar Plunges on Rate Concerns

U.S. equities finished Thursday’s session mostly lower as investors cashed in after posting nearly a two-week rally. The three major indices were supported all week by optimism over President Trump’s economic agency consisting of three major themes: fiscal stimulus, corporate tax cuts and deregulation. All three major indices also closed at record highs earlier in the week.

The major cash market indexes closed mixed on Thursday. The blue chip Dow Jones Industrial Average finished at 20619.77, up 7.91 or +0.04%. The bench mark S&P 500 Index closed at 2347.22, down 2.03 or -0.09% and the tech-based NASDAQ Composite ended at 5814.42, down 4.92 or -0.08%.

U.S. Treasurys

U.S. Treasurys rallied on Thursday as yields retreated. The benchmark 10-year yield closed at 2.45 percent and the short-term two-year note yield hovered around 1.21 percent. On Tuesday, higher yields were supported by hawkish commentary from Fed Chair Janet Yellen. However, the next day, yields fell off their highs after Yellen sounded a little more cautious about a possible rate hike in March.

Forex

The U.S. Dollar finished lower against a basket of currencies on Thursday, dropping at its fastest pace in nearly two-weeks. The catalysts behind the selling pressure were falling U.S. bond yields and uncertainty over the timing of the Federal Reserve’s next interest rate increase. The dollar was primarily driven lower by a sharp rise in the Euro and Japanese Yen.

Traders began reducing their bets for a March rate hike by the Fed late Wednesday after Yellen failed to convince them that the economy was strong enough to handle a rate hike as early as next week. During her testimony before Congress earlier in the week, Yellen seemed to hint that the central bank would raise rates at least twice instead of the three the Fed had forecast at its December 2016 meeting.

Gold

April Comex Gold posted a strong gain on Thursday in reaction to a steep decline in the U.S. Dollar and on uncertainty over the timing of the next rate hike. Investors were also buying gold as a hedge against a possible decline in the stock market and against political uncertainty in the United States and Europe. Investors are concerned about Trump’s ability to push his economic agenda through Congress, given a number of setbacks recently. Other concerns include the elections in the Netherlands, France and Germany later this year.

Economic News

U.S. economic releases continued to come out strong on Thursday. Weekly jobless claims held around their lowest levels in more than 40 years. The Philly Fed Manufacturing Index hit its highest level since January 1984, coming in at 43.3, up from 23.6 and well-above the 18.5 estimate.

In the housing sector, building permits came in at 1.29 million units, higher than the estimate and the previous 1.23 million unit read. Housing starts came in at 1.25 million units. This number beat the forecast, but was lower than the previously adjusted 1.28 million unit read.