Market Brief – Monday 7/22/19

In overnight trading, hopes of “V” shaped economic recovery were dashed as South Korea exports fell -13.6% and imports fell -10.3% on a year-over-year basis. In the first twenty days of the month, South Korea chip exports are down -30.2% and exports to China, critical for South Korea, are down -19% on a year-over-year basis.

Stocks started the day higher as more than seven hundred companies are reporting earnings this week. While earnings are expected to be good, watch forward guidance as a key to what corporate executives are seeing. The Chicago Fed National Activity Index posted its seventh straight monthly contraction, which is its longest contraction since the Great Financial Crisis.

The current rally in equities is very narrow as it has been mostly driven by four stocks: Apple, Amazon, Facebook, and Microsoft. Should these four stocks start to fall, watch out below, because they are the market. Apple, Amazon, and Facebook have yet to report earnings.

Treasury yields started the day lower and are hovering on rumors that Congress may waive the debt ceiling for the next two years. Across the yield curve, 50-day moving averages are supporting the decline in yields which are poised to break lower. When yields drop, liquidity conditions dry up and stock prices fall.

Iranian crude oil has been piling up in temporary storage tanks at Chinese ports. By not officially importing or using the stockpiled Iranian oil, China can get around U.S. sanctions. This morning the U.S. imposed new sanctions on Zhuhai Zhenrong, a Chinese company that has been transporting Iranian oil.

Stocks traded sideways most of the day but managed to closed slightly higher, while Treasury yields traded sideways most of the day and closed slightly lower. Physical gold was flat on the day along with crude oil. Agricultural commodities traded lower but buyers defended both its 50- and 100-day moving averages, which is a potentially bullish signal as both moving averages are curving upwards.