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Morning Brief 06.04.2017

06 April 2017

U.S stock index closed in negative region yesterday. In early session, stocks were higher after ADP report that the U.S private sector added 263000 jobs in March, beating the expectation of 180,000. The strong data signals that the nonfarm payroll on Friday will also show that the labor market is strengthening. ADP survey clearly shows that despite the apparent slowdown in first quarter GDP growth, market conditions remained strong.

Stocks retreated after the release of Federal Reserve monetary meeting minutes held in March, which showed that the Fed reserve official have intended to begin reducing the Central balance sheet later this year.  Also press report about House speaker Paul Ryan comments that changes in tax would take much more time than the health care overhaul would also put pressure on stocks and currencies as well.

In another data Institute of Supply Management (ISM) non manufacturing index fell to 55.2 in March versus the 57 expected as compared to 57.6 in February.

Nasdaq composite was slipped 34 points and closed at 5864, S&P 500 fell 7 points and closed at 2352 and Dow Jones Industrial Average down 41 points and closed at 20648.

The Fed official agreed at the March meeting that they would start shrinking a 4.5$ trillion of treasury and mortgage securities later this year. Still minutes of meeting remained silent on important questions regarding how quickly to reduce the holdings and to what level. The Central bank has been maintaining its holding by reinvesting the maturing securities into new treasury bonds and new mortgage. Reduction in amount would shrink the portfolio and likely to boost the dollar and long term rates. Fed’s approach to adjusting policy is likely to mute the market impact. They also indicated that they could hold the interest rate while they shrink the balance sheet. Higher rates make US assets more attractive to investor and supports U.S dollar.