Market Brief – Monday 3/11/19

In overnight trading, a deluge of bad economic news hit. Japanese tool orders fell -29.3%, China auto sales fell -15%, Turkey entered a recession, German Industrial Production fell -3.3%, South Korean exports fell -19.1%, and South Korean exports to China fell -23.9% as the global economy has hit its weakest point since the last recession.

Sunday night Fed Chair Jerome Powell in a rare interview by 60 Minutes, went on record stating the U.S. economy is in a good place. It is highly unusual for Fed Chairs to be interviewed, so this should be seen as a promotional piece to divert attention away from the Fed’s monetary tightening cycle.

January Retail Sales rose +0.2% MoM, but December Retail Sales were revised lower from -1.2% MoM to -1.6% MoM. In response, the Atlanta Fed lowered first-quarter GDP expectations to 0.2%.

U.S. stocks flew out of the get on low volume, meaning investors were happy to pay marked-up prices. The Treasury bond market is not confirming this bullish euphoria, as yield started the day lower but were flat by mid-day.

Today marks the beginning of three long-term U.S. Treasury auctions. Today’s 7-year $38 billion auction saw yields drop to their one-year low. Foreign bidders took 45.7% and domestic bidders 9.4%, which left dealers with 41.1% of the auction. Yields fell slightly following the auction.

Equities shot higher by relentless buying from corporate share buyback programs, as evidenced by the share buyback index. Treasury bonds were unable to confirm this equity ramp, as yields moved slightly higher. After crossing their 50-day moving average, thirty-year Treasury yields closed below their 50-DMA, adding move conviction that yields are headed lower, not higher.

After tagging resistance on Friday, physical gold traded lower and is likely to revisit $1,240-50/oz, which would be in line with how gold follows volatility.

Oil and gas producers attempted to revisit their overhead resistance level, but failure to reclaim will trigger a retest of their December lows. Broad equity prices should follow oil and gas producer stocks lower.