Market Brief – Wednesday 12/4/19

Stocks brushed off yesterday’s decline after President Trump along with unnamed White House staffers confirmed talks with China are going well. After Treasury yields were slammed lower yesterday, investors bid yields back into a zone of heavy resistance in hopes a trade deal will be inflationary. Failure to break this zone of heavy resistance will likely have yields retesting their all-time lows.

The weekly Mortgage Market Index fell -9.2% from this week last year as mortgage applications also fell -9.2%. The MBA Purchase Index rose +0.9% and the Mortgage Refinance Index fell -15.6% from this week last year.

ADP posted its second-lowest print in the last ten years as the national employment report showed an increase of +67k jobs in November against expectations of a +135k print. Goods-producing jobs lost -18k jobs while services added +85k jobs. ADP revised October’s +125k print down to +121k jobs.

The New York Fed accepted bids for $70.1 billion of overnight dollar loans and purchased $7.501 billion of Treasury Bills against offers of $22.313 billion, making the offer oversubscribed by 2.97 times.

The ISM Services Index fell from 54.7 to 53.9 in November as the growth in the services sector slows. While the market is celebrating an expanding services sector, the services sector usually lags the manufacturing sector by a few months. Breaking down the survey, new orders, employment and prices all increased their rate of growth. Business expectations for the coming year are at their lowest level since 2012.

The Department of Energy reported crude oil inventories as Crude: -4.856mm (-1.734mm expected), Cushing: -302k, Gasoline: +3.385mm (+1.826mm expected), and Distillates: +3.063mm (+1.080mm expected). Crude oil traded higher following the report despite a larger-than-expected build in products.

Investors bid stock prices and Treasury yields higher on trade optimism even though the ADP report showed hirings are rapidly slowing down. Thirty-year Treasury yields, which have been leading the rest of the curve lower, closed below its 100- and 50-day moving averages and in a strong area of resistance. As long as resistance holds, Treasury yields should retest support at their all-time lows.

Crude oil rebounded after today’s EIA report showed a better-than-expected inventory draw despite Saudi Arabia threatening to crank up the pumps as the kingdom is unhappy with its fellow OPEC members. Agricultural commodities closed over their 200-day moving average for the second day in a row, which is usually a bullish signal. Physical gold continues to struggle to reclaim $1,500 per ounce despite a large speculative long position in the futures market.