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Market Brief – Wednesday 4/10/19

Stocks started the day slightly higher as 10-year Treasury yields broke down below a short-term support level. Japan reported that Machine Tool Orders have collapsed at a -28.5% annualized rate. In pre-market trading, mortgage applications fell -5.6% from last week’s +18.6% gain.

The Consumer Price Index (CPI) rose +1.9% on an annualized basis, which is higher than expectations of a +1.8% print. The big surprise in the report was real average hourly earnings, which fell from +1.9% YoY to +1.3% YoY. Lower wage growth is not inflationary.

The EIA reported crude oil inventories as Crude +7.029mm (+2.5mm expected), Cushing -1.133mm, Gasoline -7.710mm (largest draw since September 2017), and Distillates -0.116mm. Crude oil prices were flat following the report. This large crude oil build is unexpected as refineries are under maintenance, so crude stocks should be falling.

According to the China Passenger Car Association, March automobile sales fell -12%, after falling -18.5% in February and -4% in January. American car companies, such as General Motors, derive a reasonable amount of revenue from sales in China, so this is not a positive report for the global economy.

Today’s $24 billion 10-year Treasury auction saw strong demand. Foreign bidders took 68% of the auction, domestic bidders took 20% of the auction and the dealers were left with 12% of the auction. Treasury yields fell following the auction.

Stocks reversed yesterday’s losses while 10-year Treasury yields closed below support, which suggests yields are going to continue falling. Physical gold closed right over its 50-day moving average as it tries to reclaim its bullish stance. Oil and gas producers closed higher despite three weeks of crude oil inventory builds. Agricultural commodities closed higher as reports of another storm is headed towards the Midwest.