Market Brief – Tuesday 9/24/19

In overnight trading, Asia continues to export deflation. The August Producer Price Index on a year-over-year basis fell -0.6% for South Korea, -0.8% for China and -0.9% for Japan. Lower Asian producer prices will lead to lower consumer prices for American’s.

China has issued waivers for the import of up to 2-3 million tons of U.S. soybeans. While sources vary, an estimated 10 to 20 cargo ships of soybeans have been ordered for delivery between October and December. This purchase is out of need, not to cool the trade tensions. Colder weather is threatening frost in some states and rain is not helping crops reach maturity. Agricultural commodities were higher in early trading.

Today’s $30 billion 14-day term repo operation was oversubscribed as $62 billion of bids came in. The liquidity crunch appears to be back as the overnight repo operation saw $80.2 billion of bids against an offer of $75 billion.

Consumer confidence is waning as Consumer Confidence in August fell to 125.1 from 133.0 in September. Both the present situation and expectations also fell. When consumer confidence begins to fall, the savings rate rises and interest rates fall.

The Richmond Fed Manufacturing index for September fell to -9 on expectations of a +1 print. This is another sign that manufacturing in the U.S. is starting to contract like the rest of the world.

Stocks started the day higher after U.S. equity futures jumped shortly after reopening yesterday evening. Even after the S&P 500 jumped back over 3,000 points in the futures market, the cash market couldn’t hold the gains in early trading. Treasury yields also fell but quickly ran into support where yields stopped yesterday. Crude oil was lead the market lower in early trading.

Insider selling hit a 20-year high as corporate executives dump their shares while their companies buy its stock back. Corporate executives are on track to sell $26 billion of their shares while the retail public continues to buy.

Today’s $40 billion 2-year Treasury auction saw a surge in demand. Foreign bidders took 57.0% of the auction and domestic bidders took 15.9% of the auction, which left securities dealers with 27.1% of the auction. Yields were flat following the auction after falling in early trading.

Stocks closed the day lower as liquidity dries up and investors turn to safe assets. Treasury yields were lower but ran into stiff support as 30-year yields retested their prior all-time lows. Crude oil was hit the hardest today head of the API inventory report. Gold and agricultural commodities closed higher on the day.

The American Petroleum Institute reported crude oil inventories as Crude: +1.38mm (-600k expected), Cushing: +2.3mm, Gasoline: +1.9mm, and Distillates: -2.2mm. Crude oil traded lower following the report.