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Market Brief – Wednesday 10/2/19

ADP reported that September payrolls increased +135k against expectations of a +145k print, but August was revised down to +157k from +195k. Hirings at small companies continue to slow and if the trend continues, expect unemployment claims to rise.

The New York Fed’s overnight repo operation saw $42.05 billion of bids accepted as liquidity constraints appear to be easing. Next week liquidity conditions will tighten as the 14-day repo operations come due plus there are a large number of Treasury auctions scheduled.

Stocks started the day lower as money managers sell stocks for quarterly portfolio rebalancing and quarterly fees. In addition, CTA quantitative computers hit sell targets last night which caused them to sell this morning. Should stocks hold their early morning lows, CTA models will sell again tomorrow. Today’s early drop in stock prices was not a risk-off move as Treasury yields fell, but enough to show a flight to safety.

The Department of Energy reported crude oil inventories as Crude: +3.104mm (+2.25mm expected), Cushing: -201k, Gasoline: -228k (+600k expected), and Distillates: -2.418mm. Crude oil traded lower following the report.

It was an ugly day for stocks as nearly the entire market was in the red over fears of slowing domestic growth. The S&P 500 held resistance at its January 2018 highs. Treasury yields were down slightly, which indicates this is not a risk-off move. Gold traded higher but ran into resistance at the bottom of a short-term topping pattern. Crude oil closed in the mid $52 per barrel range and oil and gas producing stocks were hammered again.

The U.S. Treasury announced $7.5 billion of tariffs on European Union imports effective October 18th after winning a World Trade Organization complaint against the EU for illegal subsidies. There will be 10% tariffs on large commercial aircraft and 25% tariffs on agricultural and industrial goods. The full report on the goods being tariffed will be released soon.