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Market Brief – Friday 7/12/19

U.S. equity futures rose in overnight trading as global investors believe U.S. stocks are immune to the global downturn that is affecting Asia and Europe. In overnight trading, China exports fell to +1.3% YoY and imports fell to -7.3% YoY. Singapore retail sales fell -2.2% in June. Eurozone industrial production improved to +0.9% in June but fell -0.5% on an annualized basis.

Investors continue to believe that the Fed can cut rates to drive asset prices higher, but today’s Producer Price Index tossed some cold water on those hopes. The Fed wants to cut due to the global slowdown, but if they are data dependent, a cut is not a certainty.

Producer Prices increased +1.7% on an annualized basis while Core PPI, excluding food and energy, rose to +2.3% on an annualized basis which is higher than the Fed’s two-percent target. Investors appeared to approve of this report, but when producer prices are rising while consumer prices are falling, it is an indication of weak demand. Producers are cutting their margins to move products which should show up in their second-quarter earnings.

Eight states are projected to be hit by tropical storm Barry over the weekend as news outlets report the potential for biblical flooding. The Gulf of Mexico receives all the water west of the Appalachians and east of the Rockies, meaning all the oil and other contaminants from the recent flooding are about to get swept up by the storm and dumped across eight states. Agricultural commodities were trying to break over their 200-day moving average in early trading which if successful, would imply a +5% move based on the charts.

Sellers successfully drove Treasury yields higher in the last few trading days but haven’t been able to gain much traction today. In overnight trading, 30-year Treasury yields were rejected at the bottom side of their 50-day moving average, which is further confirmation that yields are in a bear market and bonds are in a bull market.

Stocks closed the week higher ahead of second-quarter earnings season that starts on Monday. Investors will soon find out if corporations have generated enough revenue or bought enough stock back to hit their targets. Treasury yields reversed direction and headed lower after early trading as short sellers ran out of ammunition.

Physical gold continues to get rejected at its overhead resistance level, but not for the lack of trying. Gold and silver miners are holding under their resistance levels as well hoping something changes to spur a rally. Unless gold breaks out, the odds of it retesting support is increasing.

Agricultural commodities closed over their 200-day moving average and are looking to make a strong move higher as long as the bulls can keep the momentum going. Oil and gas producing stocks closed higher on the week, but not much higher considering the recent crude oil inventory gains. Oil and gas producing stocks remain in a downtrend.