Market Brief – Thursday 11/21/2019

With only one dissenting vote, the U.S. House of Representatives passed the Senate’s version of the Hong Kong bill on Wednesday afternoon. The bill could go to President Trump to sign as early as Thursday, which he is expected to. The passage of this bill could lead to a confrontation with China and derail the trade deal.

In a Bloomberg interview yesterday afternoon, President Trump said China is more eager to make a trade deal than we are. When asked why a deal hasn’t been made, President Trump said he hasn’t wanted to make a deal since he doesn’t feel China is stepping up to the level he wants.

Stock futures were mixed in overnight trading as conflicting news about the trade deal surface. China has extended an offer for a trade delegation to come to China to continue discussions. China’s goal is to delay the December 15th tariffs, which rumors indicate neither side wants. Treasury yields rose in early trading to confirm a key resistance level after breaking through the same level as support yesterday.

Stocks and bonds were trading nervously on whether President Trump will be signing the Hong Kong bill, even though he is expected to.  An unknown China source familiar with the trade talks said this morning that signing the bill could influence the trade talks and force China to respond.

The New York Fed accepted bids for $74.45 billion of overnight dollar loans, $29.2 billion of 14-day dollar loans, and bids of $12.729 billion against an offer of $1.801 billion of an outright Treasury Bill purchase, making the later offer oversubscribed by 6.8 times as banks continue to scramble for liquidity.

Initial jobless claims rose to +227k from +219k last week with the four-week average increasing to +221k from +217.5k. Continuing jobless claims rose to +1,695k from +1,692k. While increasing unemployment claims are not sending up any red flags, the trend in claims is rising.

The Philadelphia Fed’s Manufacturing Business Outlook Survey for November showed an increase in manufacturing activity as the survey increased from 5.6 in October to 10.4. The details were not as strong as the survey suggested. New orders slowed, prices paid fell, prices received fell, unfilled orders slowed, and capital expenditures slowed. Employment growth slowed along with hours worked. Respondents remained optimistic over the next six months.

Existing home sales rose +1.9% in October and +4.6% from a year ago. The median home price index was up +6.2% from a year ago. First-time home buyers represented 31% of sales in October, down from +33% in September.

After touching positive territory, stocks closed lower on the day as investors wait to see if President Trump will sign the Hong Kong bill. Stocks and Treasury bonds were trading inversely most of the day, which helped Treasury yields and bonds close their overnight gaps. Closing an overnight gap suggests the trend of lower Treasury yields and higher bond prices are likely to continue.