Continued U.S.- China trade tensions dictate momentum
U.S. stocks logged small gains in a choppy session on Thursday, 30 May 2019 as bond yields halted their slide, giving the market a reprieve from selling sparked by continued U.S.-China trade tensions and worries about global economic growth.
The Dow Jones Industrial Average rose 43.47 points, or 0.2%, to close at 25,169.88. The S&P 500 index gained 5.84 points, or 0.2%, to 2,788.86 and the Nasdaq Composite Index climbed 20.41 points, or 0.3%, to 7,567.72.
The bounce in stocks came despite a lack of apparent progress on the U.S.-China tariff dispute. Investors will get an update overnight on the impact of Sino-American trade tensions on the Chinese economy when China's Federation of Logistics and Purchasing issues its purchasing manager's index for May. Initial readings of available indicators suggest that the index will show the Chinese manufacturing sector falling into contraction, which could further deepen fears over global growth.
A recent rally in government bonds deepened the inversion of the yield curve, with the rate on the 10-year note sinking further below the yield on the 3-month T-bill stoking recession fears. Yields move in the opposite direction of bond prices.
The greenback, meanwhile, has remained firm all session. The U.S. Dollar Index is little changed at 98.13, hovering near its best levels of the year.
Among economic data expected for the day, the Commerce Department lowered its initial estimate of first-quarter gross domestic product growth to 3.1%, compared with the previous reading of 3.2% and average estimates for a 3% second read.
The government also issued an estimate of the trade deficit in April, which came in at $72.1 billion, versus the $71.4 billion gap in March, and below the $72.9 billion expected by economists.
ALso, new applications for jobless benefits rose to 215,000 in the week ended May 25, in line with economists expectations and above the 212,000 seen the week prior.
Separately, pending home sales fell 1.5% in April from March, and were 2% lower than a year ago. Market was expecting 0.5% increase.
Separately, an advanced reading of wholesale inventories showed that the U.S. trade deficit in goods widened slightly in April, rising to a seasonally adjusted $72.1 billion from $71.9 billion.
Treasury prices retreated with yields edging back up. The yield on the 10-year note rose 3 basis points to 2.266%.
Crude oil futures dropped on Thursday, 30 May 2019 with U.S. and global benchmark prices posting their lowest settlements since March, after U.S. government data revealed a weekly decline in domestic crude stockpiles that was much less than expected. The data also showed a further increase in production that was already in record territory.
West Texas Intermediate crude for July delivery on the New York Mercantile Exchange lost $2.22, or 3.8%, to settle at $56.59 a barrel. Front-month prices settled at their lowest since March 8 and trade down by more than 11% for May so far. Global benchmark July Brent fell $2.58, or 3.7%, to $66.87 a barrel on ICE Futures Europe, the lowest finish since March 12. The contract expires at the settlement on Friday. Front-month contract prices have lost more than 8% month to date.
The Energy Information Administration on Thursday reported that U.S. crude supplies edged lower by 300,000 barrels for the week ended May 24. That marked the first weekly decline in three weeks, but it was significantly less than the 1.4 million-barrel declined expected. The American Petroleum Institute on Wednesday also reported a much bigger decrease of 5.3 million barrels. Data were delayed by a day because of Monday's Memorial Day holiday. The EIA also estimated that domestic production rose by 100,000 barrels to 12.3 million barrels a day last week. Among the products, gasoline inventories climbed by 2.2 million barrels, while distillate stockpiles fell by 1.6 million barrels last week, the EIA reported.
Lackluster trading in gold futures Thursday gave way to a solid move higher, as tepid trade in equity markets and persistent worries about U.S.-China trade tensions and sluggish global economic growth helped lift prices to their highest finish in roughly two weeks.
Gold for August delivery on Comex climbed $6.10, or 0.5%, to settle at $1,292.40 an ounce. That was the highest finish for a most-active contract since May 15. Today's advance was the second straight for the precious metals, helping gold reach its best level since mid May. July silver rose 8 cents, or 0.6%, to $14.491 an ounce, extending its rebound to a second straight session after settling Tuesday at $14.32, the lowest price of the year so far.
Precious metals have enjoyed some gains from the flight to perceived safety in gold during the Sino-American trade clashes, but worries about global demand and a strengthening dollar have also capped bullion's moves.
Looking ahead, investors will receive Personal Income and Spending data for April, the PCE Price Index for April, and the final University of Michigan Index of Consumer Sentiment for May on Friday.
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