Market Brief – Wednesday 3/18/20

Stocks reversed yesterday’s gains in overnight trading and were flat in early trading, but tripped the circuit breakers in mid-morning trading causing the markets to close for 15 minutes. Treasury yields rose in early trading as forced liquidations sent bond prices tumbling as the Fed bought $45 billion of U.S. Treasuries today.

Mortgage applications fell -8.4% from last week as tight financial conditions are likely leading to rejected applications. Purchase applications fell -0.92% and refinance applications fell -10.4%.

Ahead of the Coronavirus risks, building permits fell -5.5% and housing starts fell -1.5% in February.

The Department of Energy reported crude oil inventories as Crude: +1.954mm (+3.256mm expected), Cushing: +563k, Gasoline: -6.180mm (-2.890mm expected), and Distillates: -2.940mm (-1.963mm expected). Crude oil fell following the report.

Stocks and bonds both fell as risk-parity computer traded models were forced to sell both as they head to cash as part of their deleveraging formula. In late trading, both rebounded but closed lower on the day. Crude oil closed just over $22 per barrel as oil and gas producing stocks were crushed today out of fears crude oil will continue to fall due to weak demand and massive oversupply from the Coronavirus.