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Market Brief – Tuesday 5/19/20

Stocks traded slightly higher in early trading while Treasury yields were slowly following. Treasury Secretary Mnuchin and Fed Chair Powell testified to Congress today about the CARES Act, which had investors hoping Powell would provide forward guidance on monetary policy. Powell did indicate the Fed will likely be providing more liquidity in the future.

Housing starts fell -30.2% in April and building permits fell -20.8% in April as builders halted new projects due to the Coronavirus.

Redbook same-store weekly retail sales fell -2.6% from this week last month and -9.5% from this week last year. Investors are hoping pent up demand will lead to a surge in retail sales, but even with some states reopening, shoppers are tightening their belts.

Yesterday’s stock rally was mostly due to hedge funds being squeezed out of their short positions and forced into buying stocks to buying stocks as they closed out of their positions. Yesterday’s decline in bond prices was likely due to hedge funds selling Treasuries to raise cash to cover their equity shorts.

After slowing moving higher all day, stocks sold off in the last hour of trading on reports the results of a recent Coronavirus vaccine trial may not have been as good as advertised. Treasury yields fell on the news with 30-year Treasury yields back down to 1.417%, just above its three-month resistance channel.

The American Petroleum Institute reported crude oil inventories as Crude: -4.8mm (+2.4mm expected), Cushing: -5.0mm, Gasoline: -651k (-3.5mm expected), and Distillates: +5.1mm (+3.2mm expected). Crude oil rose in after-hours trading following the report.