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Market Brief – Tuesday 6/16/20

Stocks and Treasury yields rallied in overnight trading and shot higher in early trading on hopes for a $1 trillion fiscal stimulus package, a potential cure for late-stage coronavirus patients, and a better-than-expected retail sales report. Stocks and Treasury yields started to fall shortly after Fed Chair Powell began his testimony to the Senate and reports of increasing Coronavirus case counts.

Retail sales rose +17.7% in May and improved to -6.1% from this time last year. Excluding automobiles, core retail sales rose +12.4% in May and returned to positive territory at +2.1% from this time last year. Excluding gas and autos, retail sales rose +12.4% in May. While the month-to-month data increase, it did not reverse the broad downtrend in retail sales on a year-over-year basis.

Redbook same-store retail sales didn’t follow the headline retail sales report by falling -2.4% from this week last year and improved slightly to -8.3% from this week last year.

Industrial production rose +1.4% in May and slightly improved to -15.27% from this time last year as industrial production did not rise alongside retail sales. Manufacturing production rose +3.8% in May and capacity utilization improved slightly to 64.8%. The industrial production data suggest the retail sales data was a one-off print.

Business inventories fell -1.3% in April and retail inventories, excluding autos, fell -1.1% in April.

Stocks and Treasury yields closed higher today, but both closed below their session highs. After holding support at 1.4%, 30-year Treasury yields found resistance today at their 100-day moving average. Buyers, including the Fed, continue to put a ceiling on Treasury yields despite investors believing that inflation is coming even though the economic data indicates otherwise.

The American Petroleum Institute reported crude oil inventories as Crude: +3.857mm (-3.5mm expected), Cushing: -3.289mm, Gasoline: +4.267mm (-2.2mm expected), and Distillates: +919k (+3.1mm expected). Crude oil fell in after-hours trading following the unexpected crude oil build.