Market Insights 6/12/2019

U.S. equities finished with modest losses, as the recent rally on the back of heightened Fed rate cut expectations and the averted Mexican tariffs succumbed to persistent uncertainty over a U.S.-China deal.

Treasury yields were mostly lower and the U.S. dollar was higher following another tame read on consumer price inflation and a surge in mortgage applications. Gold gained ground, but crude oil prices tumbled to their lowest level in nearly five months following more bearish oil inventory data that showed supplies continue to climb.

The Markets…

The Dow Jones Industrial Average fell 44 points (0.2%) to 26,005

The S&P 500 Index lost 6 points (0.2%) to 2,880

The Nasdaq Composite declined 30 points (0.4%) to 7,793

In light-to-moderate volume, 677 million shares were traded on the NYSE and 1.9 billion shares changed hands on the Nasdaq

WTI crude oil tumbled $2.13 to $51.14 per barrel and wholesale gasoline was down $0.07 at $1.69 per gallon

The Bloomberg gold spot price rose $6.05 to $1,332.89 per ounce

The Dollar Index— a comparison of the U.S. dollar to six major world currencies—moved 0.3% higher to 97.01

Consumer price inflation cooler than expected again, mortgage applications surge

The Consumer Price Index (CPI) rose 0.1% month-over-month in May, matching the Bloomberg estimate, and versus April’s unrevised 0.3% increase. The core rate, which strips out food and energy, was also 0.1% higher m/m, versus expectations of a 0.2% increase and matching April’s unadjusted rise. Y/Y, prices were 1.8% higher for the headline rate, below forecasts of a 1.9% gain and April’s unadjusted 2.0% rise. The core rate was up 2.0% y/y, south of projections calling for it to match April’s unadjusted 2.1% gain.

The MBA Mortgage Application Index surged 26.8% last week, following the prior week’s 1.5% increase. This was the largest weekly gain since January 2015 as a 46.5% jump in the Refinance Index was met with a 10.0% increase for the Purchase Index. The average 30-year mortgage rate fell 11 basis points to 4.12%.

Treasuries were mostly higher, as the yield on the 2-year note dropped 5 bps to 1.88% and the yield on the 10-year note decreased 2 bps to 2.12%, while the 30-year bond rate was flat at 2.61%.

Europe and Asia lower on trade and oil weakness

European equities were mostly lower, as U.S.-China trade tensions remained elevated and a source of uneasiness with both countries trading tough talk regarding the dispute. Energy issues led to the downside, with crude oil prices extending a recent tumble on the trade uncertainty and another dose of data showing increasing oil inventories in America.

The euro was little changed versus the U.S. dollar and the British pound was also nearly unchanged as U.K. Brexit uncertainty continued to fester amid the ongoing campaign for the region’s next prime minister. Bond yields in the region were mixed, with the economic calendar a bit light, but Spanish consumer price inflation rose in line with forecasts for May.

Stocks in Asia finished lower amid lingering U.S.-China trade concerns and as the U.S. markets snapped a five-session winning streak yesterday. The markets also digested a plethora of economic data, with Japanese core machine orders—a gauge of capital investment—unexpectedly rising for April, while China’s May inflation and lending came in mixed. China’s consumer price inflation accelerated in line with expectations and its wholesale price inflation cooled as anticipated, while the nation’s aggregate financing—a measure of total credit issued—and new yuan loans both rose by smaller amounts than projected.

Stocks in Japan decreased, with a string a gains snapped as the data was met with the lingering trade uneasiness and some strength in the yen.

Chinese equities and those traded in Hong Kong fell with the downside pressure appearing to be amplified by protests in the region in regard to a contentious extradition law that lawmakers were set to debate but was delayed to a later time.