Mixed economic data weigh on market sentiments
US stocks ended in the red on Wednesday, 12 June 2019. The Dow Jones Industrial Average finished lower for a second day in a row as investors digested a reading on May consumer inflation and continued to eye the U.S.-China trade fight.
The Dow Jones Industrial Average ended down 43.68 points, or 0.2%, at 26,004.83, marking its first back-to-back loss this month, while the S&P 500 index Slost 5.88 points, or 0.2%, to finish at 2,879.84. The Nasdaq Composite Index fell 29.85 points, or 0.4%, to 7,792.72.
The S&P 500 utilities, health care and real estate sectors were among the day's best performers. The S&P 500 energy sector was Wednesday's worst-performing group, falling on the back of oil prices amid bearish inventory data. The financials sector was undercut by lower Treasury yields and by shares of Wells Fargo after it warned net interest income for 2019 will be at the low end of prior guidance.
High expectations for the Fed to signal for a rate cut in its policy meeting next week were bolstered by soft inflation data in the Consumer Price Index (CPI) for May. Total CPI increased 0.1% as expected. The market also remained hopeful for a Trump-Xi meeting at the G-20 summit at the end of the month, although reports indicated there have been little preparations for a meeting. These positive considerations continued to tame any serious selling interest and helped foster gains in six of the 11 S&P 500 sectors.
The dollar index advanced 0.3% on Wednesday.
Reviewing Wednesday's economic data, which included the Consumer Price Index for May, the weekly MBA Mortgage Applications Index, and the Treasury Budget for May. Total CPI increased 0.1%, as expected, and so did core CPI, which excludes food and energy prices (consensus +0.2%). The monthly changes left the yr/yr readings at 1.8% and 2.0%, respectively, versus 2.0% and 2.1% for the 12 months ending in April. The key takeaway from the report is that consumer inflation pressures remain muted, which in turn is going to reinforce the market's inflated expectations for the Fed to cut the target range for the fed funds rate sooner rather than later.
The weekly MBA Mortgage Applications Index soared 26.8% amid a drop in mortgage rates.
Separately, the Treasury Budget for may showed a deficit of $207.8 billion versus a deficit of $146.8 billion for the same period one year ago. The Treasury Budget is not seasonally adjusted, so the May deficit cannot be compared to the $160.3 billion surplus for April. The fiscal year-to-date deficit is $738.6 billion versus a deficit of $532.2 billion for the same period ago. The budget deficit over the last 12 months is $985.4 billion, versus $924.4 billion for the 12 months ending in April.
Bullion prices ended higher at Comex on Wednesday, 12 June 019. Gold prices scored back-to-back session gains on Wednesday, with global headlines emphasizing trade-war uncertainty, tensions in the Middle East and protests in Hong Kong providing a lift to the haven metal.
Gold for August delivery on Comex rose $5.60, or 0.4%, to settle at $1,336.80 an ounce. Futures prices, which have now climbed for 10 out of 11 sessions, are up roughly 2% month to date. July silver which serves as both a haven asset and has industrial purpose, added 1.3 cents, or almost 0.1%, to $14.753 an ounce.
With trade still in focus, most global stock markets declined, boosting the appeal of haven gold. The precious metal held onto gains after a report showed that the U.S. consumer price index rose a scant 0.1% in April. It was the smallest increase since January.
Crude oil prices logged the lowest finish since January on Wednesday, 12 June 2019 as U.S. crude supplies climbed a second week in a row and concerns about energy demand persisted on the back of growing U.S.-China trade tensions.
West Texas Intermediate crude for July delivery fell $2.13, or 4%, to settle at $51.14 a barrel on the New York Mercantile Exchange. That was the lowest front-month contract finish since 14 January 2019. August Brent crude lost $2.32, or 3.7%, to $59.97 a barrel.
The Energy Information Administration on Wednesday reported that U.S. crude supplies climbed by 2.2 million barrels for the week ended June 7. That marked a second weekly gain in a row. Market had expected a modest increase of 80,000 barrels for crude stocks, on average. The EIA data also showed that gasoline inventories rose by 800,000 barrels, while distillate stockpiles declined by 1 million barrels last week. Market had shown expectations for a supply decrease of 380,000 barrels for gasoline and a climb of 704,000 barrels for distillate stockpiles. The EIA estimated a 100,000 barrel-per-day decline in total U.S. crude production last week, to 12.3 million barrels a day, though output remains in record territory.
In its Short-term Energy Outlook report released Tuesday, the EIA reduced its forecasts for this year's oil prices and for U.S. crude-oil production in 2019 and 2020. The EIA forecasts 2019 domestic crude production of 12.32 million barrels a day, down 1% from the May forecast.
Looking ahead, investors will receive the weekly Initial and Continuing Claims report and Export and Import Prices for May on Thursday.
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