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Market Brief – Friday 5/1/20

Stocks fell in overnight trading and continued their slide in pre-market trading after President Trump threatened to block a government retirement fund from investing in Chinese stocks. Treasury yields also fell in overnight trading, but sellers were quick to push back as investors increase their bets on inflation.

The Markit Manufacturing PMI fell to 36.1 in April from 48.5, signaling a deep contraction in the U.S. manufacturing sector. The ISM Manufacturing PMI fell to 41.5 in April from 49.1 the prior month. ISM Manufacturing employment cratered to 27.5, new orders crashed to 27.1, and prices fell to 35.3, confirming the broad disinflationary slowdown in the U.S. manufacturing sector.

Construction spending was a bright spot in March as it rose to +0.9% from -2.5% the month before.

The New York Fed announced this afternoon it was going to scale back its asset purchases next week to $8 billion per day of Treasury securities and $6 billion per day of Mortgage-Backed Securities. Treasury yields did not react to the news.

Stocks closed sharply lower on the day after buyers were unable to stage a turnaround. Treasury yields closed down slightly as sellers hold on to their deep short positions hoping inflation will magically appear. Crude oil closed just under $20 per barrel as investors continue to bet on a rapid economic recovery, even as tens of millions of barrels of oil are sitting offshore in ships, with more on the way.