Market Brief – Wednesday 7/24/19

Stock investors ignored the bad economic news out of Europe and the poor earnings from Boeing and Caterpiller in early trading while Treasury yields did not, and headed lower. In overnight trading, the Eurozone flash PMI fell to 46.4 from 47.7 and the German manufacturing PMI fell further into contraction to 43.1 from 45 and the German services PMI fell to 55.4 from 55.8.

New Home Sales spiked +7.0% higher in June after May’s new home sales were revised lower to -8.2.% March and April new home sales were also revised lower. Even as mortgage interest rates fall, new home sales are not increasing as fast as they normally do when interest rates fall.

The EIA reported crude oil inventories as Crude: -10.835mm, Cushing: -429k, Gasoline: -226k, and Distillates +613k. A large crude oil draw was expected due to shutdowns from tropical depression Barry. While crude oil prices rose following the reports, gasoline and distillates didn’t fall very much which indicates weakening demand. Less than an hour after the report, crude oil prices fell below their 50-day moving average.

Today’s $41 billion 5-year Treasury auction saw foreign bidders take a mere 53.54% of the auction, domestic bidders take 13.7% of the auction, which left securities dealers with 32.9% of the auction. Weak demand for this auction is surprising given the slowing global economy and expectations for the Fed to cut rates at the end of the month. Yields rose slightly following the auction and then started falling.

Investors went all-in today and were able to slam volatility down so the S&P 500 could make an all-time closing high. U.S. investors clearly feel our economy immune to the global slowdown that is hitting Asia and Europe or the Fear Of Missing Out is strong.

Treasury yields were mostly lower on the day as bond prices rose despite a poorly received 5-year Treasury auction. Crude oil prices headed lower despite a big crude oil draw as gasoline and distillate inventories suggested demand is weaker than the crude oil draws are suggesting. Physical gold managed to cross over its resistance again but remains directionless.

Markets will be closely watching the European Central Bank tonight as they are expected to announce lower interest rates and the possibly the resumption of their bond purchase program.