Rising United States Treasury yields have been mentioned as part of the narrative during the October sell-offs, but U.S. stocks gained to start the month of November as benchmark yields ticked lower on the latest manufacturing and construction data.
The benchmark 10-year note went down to 3.142, while the 30-year yield ticked lower to 3.381. Shorter duration yields also moved lower with the 2-year reaching 2.855 and the 5-year note fell to 2.97.
Meanwhile, the Dow Jones Industrial Average is up over 200 points as of 1:15 p.m. ET and has been able to sustain its gains thus far. The S&P 500 and Nasdaq Composite were both in the green–up 20 points and 90 points, respectively.
The drop in yields came as the Institute for Supply Management reported Thursday that manufacturing activity in the U.S. dropped to 57.7 in October after a 59.8 showing in September. Meanwhile, the Commerce Department reported that spending on new construction projects was unchanged in the month of September.
Both sets of data could be the aftereffects of the U.S.-China trade wars beginning to materialize. During a press conference after announcing that the Federal Reserve is instituting a third rate hike in 2018, Fed Chair Jerome Powell said that monetary policy would not be affected by trade wars until raw data reflects necessary change.
“I think if you look at the aggregate performance of the U.S. economy, it’s hard to see much happening at this point,” said Powell. “You can look at it the other way and ask ‘If all the tariffs that have been announced are applied, what would be the affect at the aggregate level?’ They’re still relatively small.”
“Until we see it in the numbers, it’s hard to say how one would react,” added Powell.
The unchanged figure in construction spending for September was reflected in a slide in spending on government projects. The trade wars have placed higher costs on land, labor and lumber, discouraging builders to undertake new projects, but U.S. President Donald Trump’s latest tweet could change things.
President Trump tweeted on Thursday that he “just had a long and very good conversation with President Xi Jinping of China,” signaling that trade negotiations with the second largest economy are moving forward positively. President Trump also mentioned that continued discussions will take place at the G-20 Summit.
Just had a long and very good conversation with President Xi Jinping of China. We talked about many subjects, with a heavy emphasis on Trade. Those discussions are moving along nicely with meetings being scheduled at the G-20 in Argentina. Also had good discussion on North Korea!
— Donald J. Trump (@realDonaldTrump) November 1, 2018
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