Markets

Market Lower After US Treasury Budget Report

The U.S. Treasury released its monthly budget report for March on Wednesday.

According to the report, the Treasury reported a deficit of $176.2 billion for March, bringing the current deficit for fiscal 2017 to $526.9 billion.

The government's deficit is 15% higher from March 2016. Excluding special factors like calendar timing of receipts and payments, the year-to-date deficit would be 23% above last year at $564 billion.

Tax receipts are down 0.2% and include an 18% decline in corporate income taxes. Outlays are up 3.3% with net interest up 15%, which reflects a higher interest rate environment, and Medicare gaining 4.8%.

After the announcement, the overall market was down with the Dow Jones Industrial Average down 0.17%, the Nasdaq down 0.48% and the Standard & Poor's 500 down 0.40%.

The monthly Treasury budget tracks the changes in federal policy on spending and taxation for the fiscal year, which begins in October.

For investors, this report is an indicator of the state of the economy. The higher the deficit, the more bonds the government must sell in order to operate. If demand is constant, this leads to a higher number of available bonds at lower prices. Conversely, if the deficit decreases, the supply decreases and prices increase. Due to an increasing deficit over the past several years, more Treasury bonds have become available in the marketplace.

Additionally, higher deficits often lead to higher interest rates for Treasury securities, which is what the U.S. is currently seeing from the Federal Reserve with its rate hikes. In turn, these higher interest rates impact interest rate-bearing securities, creating a bearish environment for stocks.

The government's tax receipts also reflect the state of the economy. While higher tax receipts reflect an improved deficit situation when economic conditions are strong, lower tax receipts indicate a slow economic environment.

The Treasury's budget report for April will be released on May 10.

Start afree 7-day trial of Premium Membershipto GuruFocus.

Premium Members

This article first appeared on GuruFocus .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story

UA PBI ABT

Other Topics

Stocks

Latest Markets Videos