Dollar, Stocks Dip on Report of Possible Tax Reform Delay
It was another light economic report day on Wednesday, but there was enough fresh political news to drive the financial markets.
According to the Mortgage Bankers Association, mortgage application volume was unchanged last week from the previous week.
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The report further revealed that home loan refinance applications, which usually rise when rates fall, bucked this trend, slipping 1 percent for the week on a seasonally adjusted basis. Refinance volume fell 36.5 percent compared to the same week one year ago, when interest rates were lower.
The U.S. Dollar weakened and stocks dipped during the day after U.S. House of Representatives Speaker Paul Ryan left the door open to a possible delay in implementing a huge corporate tax cut, following a media report that his fellow Republicans in the Senate are exploring the option.
Ryan explained the reasoning behind the possible delay saying, “So what economists tell us … is that you still get very fast economic growth and you actually are encouraging companies to spend on factories and plants and equipment and hiring people sooner with the phase-in.”
A delay in implementing the corporate tax cuts could change the way the Fed reads the economy. This may mean the central bank will have to alter the number of rate hikes it expects to make during 2018.
Crude Oil
U.S. West Texas intermediate and international benchmark Brent crude oil posted a wicked two-sided trade on Wednesday as investors reacted to a surprise government report.
According to the U.S. Energy Information Administration, U.S. crude oil stockpiles rose unexpectedly during the week-ending November 3. The move was fueled by a jump in imports and a plunge in exports. U.S. production also hit its highest level since at least 1983.
Crude inventories rose 2.2 million barrels versus estimates for a 2.9 million barrel draw down. Gasoline and distillate inventories fell to multi-year lows, even as refining rates rose.
The EIA also said domestic crude production rose 67,000 barrels per day to 9.62 million bpd.
Gold
Gold futures finished higher on Wednesday as investors reacted to mixed news. A weaker U.S. Dollar helped support gold prices early in the session. The Greenback fell on expectations of possible delays in long-awaited U.S. tax reforms.
The rally was capped by expectations for a Fed interest rate hike in December. Higher U.S. Treasury yields also weighed on gold prices. Yields rose on Wednesday after a better-than-expected Treasury auction.