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Market Brief – Tuesday 7/2/19

U.S. stocks continue to price in a huge surge in domestic manufacturing while global manufacturing PMIs have contracted on an annualized basis. While stock investors are optimistic, the bond market continues to be the beacon of truth, as Treasury yields faded their early gains.

Stocks closed the day slightly higher as volatility was crushed lower. With volatility at an extremely low level and stocks unable to move higher, any negative news could lead to a significant market correction.

Physical gold and the mining stocks staged rebound today but ran right into resistance. Agricultural commodities sold off as the USDA has admitted their June crop progress report should have never been issued. The USDA reported only on the acres that were planted and omitted reporting on the acres that weren’t. Expect prices to turn higher once the USDA accurately reports the status of corn and soybean progress.

Treasury yields also fell across the curve today ahead of tomorrow’s weekly unemployment report and the ADP payrolls report. Based on the recent construction spending report, unemployment claims should rise, and new hiring should fall.

After OPEC agreed to production cuts, crude oil along with oil and gas producing stocks fell. The American Petroleum Institute reported crude oil inventories as Crude: -5.0mm (-3.0mm expected), Cushing: +882k (1.26mm expected), Gasoline -387k (2.2mm expected), and Distillates -1.7mm (-1.0mm expected). Expectations were loftier than reality, but the API report is likely catching up to last week’s EIA report.