Market Brief – Wednesday 6/19/19

Stocks are quiet ahead of today’s FOMC press release while Treasury yields ticked slightly higher as short sellers came late yesterday to defend falling Treasury yields.

The EIA reported crude oil inventories as Crude: -3.106mm (-1.75mm expected), Cushing: +642k (+30k expected), Gasoline: -1.692mm (+900k expected), and Distillates: -551k (+700k expected). Crude prices rose following the report.

The Federal Open Market Committee (FOMC) decided to hold the Federal Funds rate at the current level of 2.25-2.50% and decided to continue unwinding their balance sheet without any changes. The committee stated that uncertainties about their outlook have increased and that the committee will be monitoring the incoming economic data before making any changes to the monetary policy. Investors are interpreting the announcement to mean the Fed will be cutting rates by half-a-percent at their July meeting, even though there is no evidence the Fed will.

The FOMC updated their economic projections to show a possible -0.5% decreased in the Federal Funds rate in 2020 but expect inflation to continue rising towards their 2% target. With the economic data improving in May due to a rally in stock prices, it is unlikely the Fed will be cutting in July. The Fed is using its policy tools to calm investors, even though the Fed previously stated that the tariffs would affect the economic data through the second quarter.

Stock prices held their early morning gains as investors remain hopeful that the Fed will provide more easy money in the months to come to keep asset prices high. Ten-year Treasury yields briefly tested 2.01% today and if stock investors think stocks are the place to be, then they should check out how well bonds have been performing.

With investors banking on a July rate cut, the G-20 summit in Osaka will be the focus for investors hoping President’s Trump and Xi put an end to the trade war at the end of the month. Second-quarter earnings season is set to begin in a few weeks and the corporate share buyback blackout starts next week.