Market Brief – Monday 8/12/19

After a bullish week of buying, stocks started the week lower on trade war fears and a potential military intervention by China to quell the Hong Kong protests. China is expected to release a long letter tomorrow, or tonight for us, stating that the U.S. should not underestimate China’s will. Buyers are attempting to put a floor under stock prices, while Treasury yields are falling.

Agricultural commodities started the day lower on news of a fire in a cattle processing plant that will take the entire plant offline for some time. After the initial price drop, buyers quickly moved in to defend a prior resistance level. Today’s USDA Crop Production report is supposed to fix the blatant inaccuracies of the prior Crop Production report which was overly optimistic.

The USDA is now forecasting that Corn production will fall -4%, Soybean production will fall -19%, Cotton production will increase +23%, and Winter Wheat production will increase +3% over last year. Experts will be weighing in on the report over the next several days, but early comments are that the USDA is still overly optimistic.

Agricultural commodity prices fell slightly in the minutes prior to the USDA Crop Production report after Corn prices crashed. Seller exhaustion led to a small rebound in prices off their lows ahead of tonight’s USDA Crop Progress report that is due at market close. Buyers came in at market close to buy the dip in crops.

Liquidity dried up and stock prices fell. The S&P 500 held support going back to its January 2018 highs. Despite $1.5 trillion of corporate share buybacks and dividends, stock prices aren’t much higher than they were in January 2018. The big winner on the day was U.S. Treasury bonds as yields fell across the board.