Market Brief – Wednesday 8/14/19

U.S. equities followed Eurozone equities lower in overnight trading as German GDP Growth slid to -0.1% in the second quarter. Germany is the economic powerhouse of the Eurozone, and if they fall into a recession, so too will the rest of the European Union.

U.S. import and export prices rose +0.2% in July, but on an annualized basis, import prices are down -1.8% and export prices are down -0.9%.

The EIA reported crude oil inventories as Crude: +1.580mm, Cushing: -2.540mm, Gasoline: -1.412mm, and Distillates: -1.938mm. Crude oil fell following the report as inventories rose and the draw in products was rather weak as the summer driving season comes to a close.

Former Federal Reserve Chairman Alan Greenspan said he would not be surprised if U.S. Treasury yields turn negative and that it isn’t a big deal if they do. With the yields of many industrialized nations already below zero, it is likely U.S. yields will also go negative.

Two-year Treasury yields are now higher than 10-year Treasury yields for the first time in twelve years. The 2s-10s Treasury yield curve is a solid recession indicator, with Bank of America stating that it signals we are three months from a recession, while others point to data stating we have another eighteen months before a recession. Treasury yields fell in early trading.

After looking like they were going to retest the all-time highs, stocks reversed hard today as liquidity, or buyers, remain thin. Treasury yields remain the big winner again, as 30-year Treasury yields hit new all-time lows.

Physical gold tried to rally, but deflation is coming, which isn’t the best combination for a gold rally, especially when yields are falling. Both gold and silver mining stocks traded lower. Emerging markets stocks continue to point to lower gold prices.

Oil and gas producing stocks were slammed today after this morning’s EIA report that showed a build in crude inventories with a small draw in products. Normally during this time of the year inventories are drawing the summer driving season winds down, which is why crude prices fell.