Market Brief – Monday 10/7/19

In overnight trading, the UAW strike at GM has taken a “turn for the worse” according to the UAW’s top bargainer. The strike, now entering its fourth week, is threatening to trigger a manufacturing recession. Chinese officials said they are unlikely to agree to a broad trade deal ahead of Thursday’s trade talks in Washington, but U.S. investors remain optimistic that a deal will be struck this week.

Dollar liquidity problems returned as the New York Fed accepted $47.05 billion of overnight loans. Investors remained undeterred as they bought stocks in early trading on a day of light economic data. Treasury yields were up slightly in early trading.

Weather reports are indicating an early freeze is coming to the Midwest later this week which could damage the already late-planted crops and could send food prices higher. In response, investors sold U.S. agricultural commodities in early trading.

Stocks bounced the sold off after the Chinese Commerce Ministry stated they are willing to do a deal based on the parts of the negotiations that both sides agree to and work towards a longer-term solution on the remainder of the trade issues. This morning Navarro said the U.S. would not do a partial deal but the stock market seems to believe a deal is at hand.

Without any further news to drive the markets, stocks closed lower on the day. Treasury yields normally fall when stocks fall, but investors are expecting a weak showing this week’s 3-, 10-, and 30-year Treasury auctions that start tomorrow and end on Thursday. It isn’t unusual for yields to dip ahead of auctions.