Yahoo Finance Investors Shed Risky Assets on Concerns Over Tax Reform, Mueller Probe
After a one-day reprieve on Thursday, the theme of the week resumed on Friday with investors shedding higher-risk assets for the safety of lower-yielding assets. The catalysts remained investor skepticism over U.S. Republicans’ efforts to pass tax cuts and worries over the Mueller probe.
Earlier in the week, Congressional Republicans took important steps toward the biggest U.S. tax code overhaul since the 1980s, with the House of Representatives approving a broad package of tax cuts and a Senate panel advancing its own version of the tax legislation sought by senior lawmakers and President Donald Trump.
After the House vote, the tax debate now moves to the Senate, where it could face delays due to resistance from some Republicans and most Democrats. Full Senate activity on the tax bill is expected to take place after next week’s Thanksgiving holiday.
Investors were also concerned over a report on Thursday that Special Counsel Robert Mueller’s investigators probing possible Russian interference in the 2016 U.S. election had subpoenaed Trump’s election campaign for documents.
U.S. Economic Data
On Friday, the government reported a jump in U.S. home building to a one-year high in October. Investors pinned the large increase on the replacement of homes damaged by Hurricanes Harvey and Irma.
According to the Commerce Department, housing starts surged 13.7 percent to a seasonally adjusted annual rate of 1.29 million units. That was the highest level since October 2016. September’s sales pace was revised up to 1.135 million units from the previously reported 1.127 million units. Traders were looking for a rise of 1.185 million units last month.
Building Permits increased 5.9 percent to a rate of 1.297 million units in October, the highest level since January. Single-family home permits rose 1.9 percent, while permits for the construction of multi-family homes jumped 13.9 percent.
U.S. Equity Markets
The major U.S. stock indexes were down across the board on Friday, led by declines in the Dow and S&P 500 Index, which posted their first 2-week losing streak since August.
The weakness in the Dow was led by Wal-Mart, which posted a 2 percent loss, after reaching a new all-time high on Thursday following the release of a better-than-expected earnings report.
Weakness in the utilities and information technology sector helped pressure the S&P 500 Index. The NASDAQ Composite was dragged down by declines in the shares of Amazon, Netflix and Alphabet.
Tax reform is the major story driving the price action with some investors describing the overall theme of the market at this time as “cautiously optimistic”.
Gold
Gold posted a strong gain on Friday in reaction to a softer U.S. Dollar which was driven lower by uncertainty over the progress over U.S. tax reform. The price action suggests that gold investors are increasing bets the deal won’t be completed in a timely manner.
Crude Oil
U.S. West Texas Intermediate and internationally-favored Brent crude oil futures posted a strong gain on Friday as the markets recovered most of the week’s losses. Nonetheless, both markets still posted their first weekly loss in six weeks. After five straight sessions of losses, traders said the markets were probably due for a recovery because of technically oversold conditions.
The markets were also underpinned by reports of a 5,000-barrel oil leak in South Dakota. This event led TransCanada Corp to shut part of its Keystone pipeline system on Thursday.
In other news, the number of rigs operating in U.S. oil fields was unchanged, after posting the largest rise since June in the previous week, oilfield services firm Baker Hughes reported.
This article was originally posted on FX Empire
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