Morning Market Brief — Wednesday

Stocks slide in early trading but bounced on news that the U.S. was reaching out to China for a new round of trade talks. Most likely this is an olive branch before the Trump Administration slaps another round of tariffs on China. As quickly as the markets moved up, they began to fade the news.

Treasury yields began sliding in overnight trading and for the moment, have a lower high than back in June and August. An early sign that recent buyers aren’t turning into sellers.

The Producer Price Index (PPI) fell -0.1% MoM for the first time in 18 months. On a year-over-year basis, the PPI rose to +2.8%, missing expectations of a +3.2% increase. Producers are struggling to pass higher prices onto consumers. The PPI is correlated to the growth rate of the money supply, and as the money supply continues its multi-year deceleration, the PPI should too begin decelerating. A potential indicator that deflation is coming.

The EIA reported that crude inventories fell, while gas and distillate inventories rose last week. The continued increase in gas and distillates is a potential early warning that oil inventories are soon to rise. WTI oil prices were back above $70/barrel on the news.

While the stock market is excited over the +210k Nonfarm Payroll report for August, the Household Survey shows something completely different. The Civilian Labor Force declined by -469k people from July to August. The number of employed fell -423k and those not in the labor force fell -700k.

According to the Household Survey, the economy lost over 1 million jobs compared to the +210k from the payroll report. Given the Bureau of Labor Statistics publishes both numbers, it puts into question how the payrolls report can continually show gains against the household survey.