Market Brief – Wednesday 5/13/20

Stocks and Treasury yields were mostly unchanged from last night’s close despite producer prices deflating last month. Fed Chair Powell failed to inspire confidence this morning when he spoke via webcast to the Peterson Institute for International Economics, where many expected him to address the Fed taking the funds rate into negative territory.

Mortgage applications fell -0.3% from last week with purchase applications rising +10.3% and refinance applications falling -3.3%. Thirty-year mortgage rates were flat at 3.4%.

The Producer Price Index fell -1.3% in April and -1.2% from this time last year. Stripping out food and energy, Core PPI fell -0.3% in April and slowed to +0.6% from this time last year. Deflating producer prices are bad news for manufacturers as they take on more debt due to the economic damages from the Coronavirus.

The Department of Energy reported crude oil inventories as Crude: -745k (+4.147mm expected), Cushing: -3.002mm (-2.177 expected), Gasoline: -3.513mm (-2.216mm expected), and Distillates: +3.511mm (+2.857mm expected). Crude oil rose following the report.

Today’s $22 billion 30-year Treasury Bond auction was met with mediocre demand. Foreign bidders took 65.7% of the auction and domestic bidders took 12.9% of the auction, leaving securities dealers with 21.4% of the auction. Treasury yields rose following the auction.

Stocks closed lower but managed to find buyers in the last half hour of trading. Treasury yields closed lower but failed to hold its intra-day lows after today’s 30-year Treasury Bond auction. Crude oil was a tale of two extremes today as it closed right in the middle of its high and low for the day at $25.50 per barrel.