U.S. stock indexes are pointing to another lower open following a day of selling in the market yesterday that saw the worst performance for the S&P 500 since September with investors paying close attention to the yield on the 10 yr. Treasury which has reached the highest level since April 2014 and will likely result in higher borrowing costs in the future.
The yield on the 10 yr. U.S. Treasury opened today at 2.703 and is currently trading at 2.706 as committee members from the U.S. Federal Reserve meet today to discuss the strength of the U.S. economy during their 2 day January policy meeting which ends tomorrow.
After enduring 3 interest rate hikes in 2017, the 10 yr. Treasury has managed to stay below 2.7 percent until this week, creating a perfect scenario for borrowers and investors who have witnessed gains in U.S. stock indexes over 25 percent year over year, boosted by large scale tax cuts approved by Republicans in Congress, decent corporate earnings and “synchronized global growth,” a term that is widely circulated among analysts and economists.
On Friday the Department of Commerce reported the U.S. economy grew 2.3 percent in 2017, compared with an increase of 1.6 percent in 2016.
President Trump has boasted that the newly approved tax cuts could help the U.S. GDP to achieve 4 percent growth, although last year Fed Chair Janet Yellen dismissed that claim and said that she and Fed officials don’t believe that level of growth is achievable.
Later this evening, President Trump will give his State of the Union address before the country and speak about the strength of the U.S. economy since he was elected in 2016.
He is expected to talk positively about the newly approved tax cuts and his efforts in 2017 to lower regulations for the U.S. business community.
Infrastructure spending and trade reforms are two other topics that will likely surface in his State of the Union address.
President Trump has already cited numerous companies that have taken their savings from tax cuts and awarded their employees with large bonuses, although it remains to be seen whether corporate America will use their tax savings to create more permanent jobs for the U.S. economy.
According to the U.S. Labor Department, payroll employment growth in 2017 under President Trump totaled 2.1
million, compared with a gain of 2.2 million in 2016 under former U.S. President Barack Obama.
U.S. payroll gains have averaged 204,000 during the last 3 months.
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