Market Brief – Tuesday 9/10/19

In overnight trading, China’s beat expectations at +2.8% on an annualized basis for August with a +0.7% increase for the month. Producer prices fell -0.8% on an annualized basis, meaning China is exporting deflation. Most of China’s price increases can be attributed to food, as China is struggling with food shortages. Adding to the pain coming out of Asia, Japan August preliminary machine tool orders are down -37.1% from a year ago.

Stocks started the day lower and Treasury yields started the day higher. For those looking to buy the dip in Treasury bonds, watch 1.7% on 10-year yields and 2.2% on 30-year yields as levels of heavy overhead resistance.

Today’s 3-year $38 billion saw strong demand as foreign investors took 46.2% of the auction and domestic investors took 16.6% of the auction, which left securities dealers with 37.2% of the auction. Yields barely rose following the auction.

Like yesterday, stocks were flat with small-cap stocks closing higher on the day. Apple close over a key resistance level after ramping higher in the final minutes of trading, which could lead to a retest of the broad market’s all-time highs. After a huge run since October 2018, Treasury bonds are taking a breather as speculators renew their interest in shorting Treasury bonds. Yields were higher on the day as they ran into overhead resistance.

Agricultural commodities enjoyed the news that a trade deal with Japan is likely to be reached which will include increased purchases of U.S. agricultural goods. Crude oil started the day higher but sold off after President Trump fired National Security Advisor John Bolton. Gold also sold off today with many of the mining stocks breaking below support.

The American Petroleum Institute reported crude oil inventories as Crude: -7.23mm (-2.8mm expected), Cushing -1.4mm (-980k expected), Gasoline -4.5mm (-800k expected), and Distillates +600k (+100k expected). The OPEC cuts have helped reduce inventories and have stabilized crude oil prices. Crude oil traded slightly higher following the report.