Market Brief – Tuesday 11/27/18

U.S. equities got off to a strong start on news that President Trump may enact tariffs on imported vehicles as early as next week and that he is likely to proceed with increasing the tariff on Chinese imports from 10% to 25% in January. How exactly such news is bullish is beyond me.

Fed Vice Chair Richard Clarida maintained support for gradual rate hikes in his recent speech titled “Data Dependence and U.S. Monetary Policy.” Other members of the Fed will be speaking over the next two weeks, including Chair Powell, as investors look for any clues on future rate hike guidance.

This week the U.S. Treasury is scheduled to auction off $200 billion in debt, a 100% increase over this time last year. Despite claims the bond market is dead and interest rates are going to the moon, today’s 5-year Treasury auction saw both strong domestic and foreign demand. Yields on 5-, 10-, and 30-year Treasuries fell after the auction.

Yesterday’s trading volume was 30% below average, and today, it was even lower. Despite today’s low trading volume, the major large-cap equity indexes all closed higher. Treasury yields were down slightly.

After failing to break a resistance level last week, the gold mining stocks sold off and are likely to retest a support level that has been holding for the past three months. Physical gold also fell, breaking below its 50- and 100-day moving averages.

Agricultural commodities are holding support as trading volume increases, a sign buyers are stepping in to counteract the sellers.

Crude inventories came in well above analyst expectations with a +3.45M barrel build, according to the API report. Even Cushing saw a build of +1.302M, while gasoline inventories fell -2.62M and distillates rose +1.185M. Oil prices rallied after this report. The official government numbers will be released tomorrow morning.