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Market Brief – Tuesday 3/17/20

Stocks were up in early trading after a volatile overnight session due to persistently high volatility. Treasury yields rose in overnight trading but were slowly falling in early trading. Crude oil fell below $29 per barrel, forcing more oil producers to slash spending.

Retail sales, before the Coronavirus impact, fell -0.5% in February and slowed to +4.35% form this time last year. Excluding gas and autos, retail sales fell -0.2% in February and control retail sales, which is used to calculate GDP growth, was flat at 0.0% in February.

Redbook weekly same-store retail sales rose +1.1% over last week and surged +8.5% over this time last year. The Redbook data likely reflects Coronavirus buying fears.

Industrial production, also before the Coronavirus impact, rose +0.6% in February and +0.04% from this time last year. Manufacturing production rose +0.1% in February. Business inventories fell -0.1% and retail inventories excluding autos rose +0.3% in January. The Job Openings and Labor Turnover Survey rose to 6.963 million openings but is expected to fall next month.

After much speculation, as liquidity is drying up, the Fed has bailed out the commercial paper funding facility due to runs on money market accounts. The New York Fed purchased over $33 billion of Treasury securities in addition to offering several dollar loan programs this morning.

Stocks rallied on Mnuchin’s fiscal stimulus plan and Treasury yields rose as investors believe fiscal stimulus will be massively inflationary, even though it will not be inflationary at all. Money is being destroyed so fast as the economy slows, direct payments won’t lead to consumers taking new loans, which is how inflation occurs. It will be even harder for inflation to occur when some people are working from home, while others lose their job. Not to mention low oil prices aren’t inflationary until they are low enough to spur demand.

The American Petroleum Institute reported crude oil inventories as Crude: -421k (+3.1mm expected), Cushing: +66k, Gasoline: -7.8mm (-2.4mm expected), and Distillates: -3.6mm (-2.3mm expected). Crude oil was trading under $27 per barrel before the report and was unchanged after.