Market Brief – Thursday 6/18/20

Stocks opened the day flat as tomorrow’s huge options expiration day will likely limit the movement of stock prices today as large traders will likely put a floor on stock prices to cash in on their speculative options contracts. Diverging from stocks, Treasury yields fell in overnight trading and held their overnight losses in early trading.

Initial jobless claims missed expectations by coming in at 1.508 million new claims last week, which brought the four-week moving average for jobless claims down to 1.773 million. The more important continuing claims held at 20.544 million, indicating the labor market is not rebounding as the stock market predicted.

The Philly Fed Manufacturing Index improved to +27.5 in June from -43.1 in May. As a diffusion index, the Philly Fed indicates the monthly change, meaning manufacturing conditions improved from last month’s decline. It should not be interpreted to mean manufacturing activity has returned to normal, instead, it is less bad than the prior month. New orders and shipments saw the largest increase from the prior month while prices paid and received saw small increases. The number of employees and the average workweek both declined. Over 77% of firms expect a decrease in production for the second quarter. Firms also reported a median capacity utilization rate of 70-80%. The answers to both special questions are disinflationary.

The U.S. Leading Economic Index rose +2.8% from last month, indicating a fish-hook shaped recovery and not the V-shaped recovery investors have been betting on.

Stocks closed flat ahead of tomorrow’s options expiration while Treasury yields closed lower on the day.