By: Kent Engelke | Capitol Securities

Equities staged a nominal advance as the Trump administration plotted a strategy for tax overhaul. Financials were the market leaders as Treasury yields rose.

Speaking of Treasury yields, the bench mark 10-year Treasury is now yielding 2.19%. Last Friday, it was at 2.01%, with many then suggesting yields will soon have “1 handle.” Yields are now around a three-week high. As noted many times, approximately 99% of trades in the Treasury market are now done electronically.

A reason for the increase in yields is an unexpected pickup in inflation in England to a four-year high. Chinese and Eurozone inflation is also unexpectedly accelerating.

The PPI is released today at 8:30. Will there be an upside surprise as was the case in many of our trading partner’s economies? If so. what would be the catalyst?

Speaking of a potential catalyst, depending upon the benchmark, oil is around a 4-5 month high. Yesterday, OPEC boosted its 2018 forecast by 400,000 barrels a day, the result of stronger global economic growth. OPEC also trimmed forecasts for growth in oil supplies by 100,000 barrels a day.

The IEA commented yesterday that the world oil market is coming into balance faster than anticipated, a remark that caused Citicorp to challenge the integrity of this once highly esteemed organization. Many times I have commented about the volatility in the IEA’s pronouncements as it appears its outlook changes almost on a daily basis.

What will happen today?

Last night, the foreign markets were mixed. London was down 0.23%, Paris was up 0.01% and Frankfurt was up 0.04%. China was up 0.14%, Japan was up 0.45% and Hang Sang was down 0.28%.

The Dow should open quietly lower even as oil is advancing predicated upon the IEA’s statement that global oil demand will cling this year by the most since 2015, rising by 1.7%, while supplies are contracting about 1%. The 10-year is unchanged at a 2.18% yield.