Daily Morning Report

The Goldman Sachs Commodity Index (GSCI) is a basket of major commodity futures markets rolled into a composite index. It’s a good gauge of the overall health of the raw commodity sector. See on the weekly GSCI chart that prices have moved well off the multi-year low scored in April. In fact, a bullish “island bottom” reversal pattern has formed on the weekly chart to suggest the GSCI has put in a major bottom. The strong recovery in the oil market has helped the GSCI and is also a good sign for the raw commodity sector that has been so hard-hit by the Covid-19 pandemic. Better times lie ahead for commodity markets.–Stay tuned! Jim

Tuesday, May 19–Jim Wyckoff’s Morning Markets Report

Global stock markets were mostly firmer in overnight trading. U.S. stock indexes are pointed toward weaker openings when the New York day session begins. The U.S. stock indexes rallied sharply Monday on positive early results for a Covid-19 vaccine. Many in the marketplace are speculating it’s going to take a proven vaccine to bring the global economy completely back to life and get humans back to mostly normal day-to-day matters. Still, early this week finds trader and investor risk appetite more robust, also due in part to a sharp rally in crude oil prices recently.

Federal Reserve Chairman Jerome Powell and U.S. Treasury Secretary Steven Mnuchin will appear via videoconference before the Senate Banking Committee today, discussing the U.S. emergency lending programs Congress is implementing amid the U.S. economic crisis.

The important outside markets see Nymex crude oil futures higher early today and hitting a two-month high overnight, trading around $32.25 a barrel in the June contract, which expires today. Many were predicting the June futures contract would expire the way the May contract did—in negative territory. The U.S. dollar index is lower again early today. The yield on the benchmark U.S. Treasury 10-year note is currently around 0.7%.

U.S. economic data due for release Tuesday includes the weekly Goldman Sachs and Johnson Redbook retail sales reports, and new residential construction.

–Jim
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Monday, May 18–Jim Wyckoff’s Morning Markets Report

Global stock markets were mostly firmer in overnight trading. U.S. stock indexes are pointed toward higher openings when the New York day session begins. As the world’s major economies have started to reopen, there is some encouraging news on the Covid-19 pandemic front. Reports say the rate of increase of new infections is at the slowest pace in months. Federal Reserve Chairman Jerome Powell said over the weekend the U.S. economy could recover steadily through the second half of the year, under the condition that there is no second wave of Covid-19. Powell said the Fed still has more ammunition to stimulate the U.S. economy, if it’s needed, adding there needs to be a vaccine for the economy to fully recover and that may be more than a year away.

In overnight news, Japan, the world’s third-largest economy, sank into recession in the first quarter, as its gross domestic product contracted by 3.4% in the period.

The important outside markets see Nymex crude oil futures sharply higher early today, at a five-week high, and trading around $31.50 a barrel in the June contract, which expires late this week. Many were predicting the June contract would expire the way the May contract did—in negative territory. The U.S. dollar index is near steady early today. The yield on the benchmark U.S. Treasury 10-year note is currently around 0.64%. Spot (cash) gold hit a seven-year high overnight, with Comex futures getting close to April’s multi-year high.

U.S. economic data due for release Monday is light and includes the NAHB housing market index.

–Jim
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The Nymex crude oil futures market less than a month ago traded down to minus $40 a barrel. Since that time prices have rallied and are closing in on $30 a barrel. That’s impressive and if you do the math it’s the sharpest rally in the shortest timeframe in the history of oil futures market trading. Such are the times in which we are living. The strong recovery in the oil market is a good sign for the raw commodity sector that has been so hard-hit by the Covid-19 pandemic. Still, one has to remember that in January Nymex crude oil futures traded at $60 a barrel.–Stay tuned! Jim

Friday, May 15–Jim Wyckoff’s Morning Markets Report

Global stock markets were mostly firmer in overnight trading. U.S. stock indexes are pointed toward slightly higher openings when the New York day session begins. Many traders and investors are wondering how the U.S. stock market has rebounded so strongly, what with 36 million American workers losing their jobs in just two months’ time and a vast number of businesses and commerce still shuttered. Bigshot investment managers have gone on TV this week to say the U.S. stock market is presently the most over-valued they have ever seen it. However, these guys are likely just “talking their own book.” Still, the general public is taking a dim view of Wall Street recovering smartly, while main street continues to see major suffering. There are growing tensions as workers in the lower halves of nations’ income levels, who have seen the most job losses and who have the least amount of money saved, desperately need to get back to work but many governments won’t let them. This situation cannot go on for an extended period of time without civil unrest, which is already being seen in a few areas. This growing unease has likely helped gold get a better safe-haven bid recently.

In overnight news, the Euro zone first-quarter gross domestic product came in at -3.8% from the fourth quarter and down 3.2%, year-on-year.

Economic data released in China Friday was somewhat upbeat, showing that the world’s second-largest economy is recovering from the first-quarter quarantining of the public. However, a worrisome component of the data was that retail sales fell 7.5% in April, suggesting consumers, while back to work, are still leery about spending.

The important outside markets see Nymex crude oil futures higher early today and trading around $28.00 a barrel. The recent rally in the crude oil market has been a bullish element for the stock markets’ rallies. The U.S. dollar index is lower today. The yield on the benchmark U.S. Treasury 10-year note is currently around 0.62%.

There will be important U.S. economic data out Friday morning that will likely reflect the serious damage being inflicted upon the world’s largest economy. Due out are April retail sales (seen down around 12%), industrial production for April (seen down 11%), the University of Michigan consumer sentiment survey, the Empire State manufacturing survey, manufacturing and trade inventories, and Treasury international capital data.

–Jim
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Thursday, May 14–Jim Wyckoff’s Morning Markets Report

Global stock markets were mixed to lower in overnight trading. U.S. stock indexes are pointed toward narrowly mixed openings when the New York day session begins. Traders and investors continue to assess and reassess the Covid-19 situation as it pertains to global, national and local economies. Human nature appears to be competing more and more with continued warnings from health experts–meaning people that have been cooped up for two months desperately want to get out and resume more normal lives, even though the pandemic is far from being under control and no vaccine is on the horizon.

The U.S. trading session will see the weekly jobless claims released, with the latest reading expected to show new claims of around 2.5 million. If that figure is realized, it would still be markedly down from weekly jobless numbers seen recently.

The marketplace takeaways so far this week include a growing number of economists now projecting longer recovery periods for major world economies, highlighted by Federal Reserve Chairman Jerome Powell Wednesday providing a grim picture of the U.S. economy and its path out of the pandemic. The other takeaway is a strong rebound in stock markets despite many main street businesses remaining shuttered and large segments of populations still in quarantine. How long can this juxtaposition last?

U.S.-China relations remain close to the front burner of the marketplace. The U.S. this week has accused China of hacking U.S. firms working on a Covid-19 vaccine. Given the already strained relations between the world’s two largest economies, it’s hard to imagine they will emerge from the current health crisis without profound and permanent changes in their relationship, including supply chains.

The important outside markets see Nymex crude oil futures higher early today and trading around $26.50 a barrel. The International Energy Agency Thursday said global oil demand in May will drop by 21.5 million barrels—outstripping the recent supply reductions. The U.S. dollar index is firmer today. The yield on the benchmark U.S. Treasury 10-year note is currently around 0.61%.

Other U.S. economic reports out Wednesday include import and export prices. Several Federal Reserve officials are scheduled to give speeches today.

–Jim
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