Market Brief – Thursday 1/23/20

Stocks fell slightly in overnight trading and while they traded lower in early trading, buyers were attempting to push prices higher. Thirty-year Treasury yields broke through support in overnight trading, triggering a short squeeze and a rally in bond prices. Crude oil traded lower in overnight trading, but today’s crude oil inventory report helped prices bounce off their morning lows.

Initial jobless claims rose slightly to 211k and the 4-week moving average for initial jobless claims fell slightly to 213.25k. Continuing jobless claims also fell slightly to 1,731k as signs employers are still hiring.

The Conference Board’s U.S. Leading Index fell -0.3% in December and is now below its 2016 lows. The LEI suggests either the economy is running below its potential or it’s recessing.

Yesterday afternoon the New York Fed purchased $1,801 billion of Treasury Notes against offers of $12,928 billion, making the offer oversubscribed by 7.2 times. This is the first purchase of T-Notes since the Fed started its $60 billion per month T-Bill purchase program in October.

The New York Fed accepted bids for $44.150 billion of overnight dollar loans and bids for $30 billion of 14-day term dollar loans as the liquidity process persists. The Fed also purchased $1,601 billion of Treasury Notes against offers of $12,487, making the offer oversubscribed by 7.8 times.

In overnight trading, the global economy is continuing to slow as Japan’s exports fell -6.3% and imports fell -4.9% from this time last year.

The Department of Energy reported crude oil inventories as Crude: -405k (-1.009mm expected), Cushing: -961k, Gasoline: +1.745mm (+3.090mm expected), Distillates: -1.185mm (+1.014mm expected). Crude oil rose off its early morning lows following the report. Gasoline inventories are now at their highest level in history.

The Kansas City Fed Manufacturing Index fell to -4 from -3 in January while the Composite Index rose from -5 to -1.

Stocks nudged out a small gain as buyers fought to get prices back into the green for the day. Aided by the Fed buying Treasury Notes, Treasury yields fell across the curve as the Fed’s buying threatens to unravel the second largest short position in the history of the Treasury bond market. Crude oil, along with oil and gas producing stocks, pared some of their early losses but still closed lower on the day.