Markets Anxious on Record Virus Growth


by Craig Dismuke, Dudley Carter
July 10, 2020

CORONAVIRUS UPDATE

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Monitoring the Virus Headlines: The COVID-19 virus is proving just how difficult it will be to contain, with more confirmed cases yesterday in the U.S. than any previous day. The U.S. reported 63,206 new cases yesterday, a record-high for any country during the outbreak.  While there are questions about the accuracy of the data, China reported just 83,581 cases during the entirety of its outbreak.  On a positive note, a couple of states with concerning outbreaks saw new cases come in below recent trends. Florida and California reported below-average levels for new infections. Texas, however, reported 11,612 new cases, and increase of 4.4% from Wednesday compared to the seven-day average of 4%.  Arizona added 4,057 new cases, the most in six days. In addition, Florida, Texas, and California all set a record for deaths from the virus, although California’s governor noted his state’s tally included some data from previous days that had been delayed.

 

TODAY’S CALENDAR

Producer Prices Remain Soft, This Time on Drop in Meat Prices: Producer prices were weaker than expected across-the-board in June, falling 0.2% MoM in June.  A 5.2% decline in food prices, thanks to a 28% drop in meat prices, helped push overall prices lower.  When excluding food, energy, and trade services, prices rose 0.3% MoM but remain well in-check.  On a year-over-year basis, producer prices fell 0.8%. There is unlikely to be any meaningful consumer inflation once supply chains are remedied given the disruption, and potential loss, of demand.


YESTERDAY’S TRADING

Stocks Were Broadly Weaker Despite Another Nasdaq Record: Another record close for the Nasdaq was an optimistic outlier in Thursday’s trading session as the Dow and S&P 500 pulled back and the 10-year Treasury yield fell to its lowest level since late April. The 0.5% gain for the tech-focused index solidified its fifth all-time high close in the last six sessions. The broader sentiment for equities, however, was more subdued as the Dow slipped nearly 1.4% and the S&P 500 edged 0.6% lower. Nine of the latter’s 11 sectors closed lower with a 4.9% drop in energy shares doubling a 2.2% decline for financials, the second-worst performers on the day. Crude prices fell back more than 3% amid general economic jitters and a return of some production in Libya.

Treasury Yields Hit Multi-Week Lows: Stocks’ euphoric run has hit a snag this week as record infections in the U.S. have cautioned investor sentiment ahead of the second quarter earnings season which begins next week. While case counts in states with some of the most concerning outbreak trends were below average on Thursday, several reported records for deaths from the virus. Treasurys rallied as stocks retreated, pushing the 10-year yield down 5.1 bps to 0.61%, its biggest daily decline in nearly a month to its lowest level since April 21. A morning move lower for yields gained steam after an auction of 30-year bonds stopped through by 2.6 bps, the most since 2014 in a signal of strong investor demand.


OVERNIGHT TRADING

Chinese Stocks End Eye-Catching Acceleration in Mixed Global Session: U.S. equity futures were stuck in the middle of mixed performances across Asia and Europe while Treasury yields have added to yesterday’s declines that pushed yields back down near record-low levels. Chinese equities fell for the first time in nine days, knocking 1.8% off the CSI 300 after the index surged nearly 18% in less than two weeks to its highest level in five years. Hong Kong’s Hang Seng, however, led regional declines as the country closed schools in response to a recent jump in new infections. A sparsely-populated weekly global economic calendar has freed up more time for investors to fret about a continued acceleration of cases in multiple countries, including the U.S.

Treasury Yields Fall Back to Record-Low Levels: European equities initially followed Asian markets lower, but quickly diverged with a sharp jump back into positive territory after Italy’s industrial output recovered more sharply than expected in May. Production at Italian factories spiked 42.1% after contracting 20.5% in April, convincingly outpacing expectations for a 24% improvement. The recovery in output in France also beat economists’ estimates. U.S. equities are expected to add to yesterday’s declines based on earlier futures trading which reflected roughly 0.7% declines for the Dow and S&P 500. Treasury yields declined as upward pressure on prices for safe haven assets continued amid the persistent uncertainty. At 7:20 a.m. CT, the 2-year yield was down 1.2 bps to 0.139%, matching its all-time low close from early in May. The 5-year yield was 2.4 bps lower to a record-low 0.26%. The 10-year yield had dropped 3.6 bps to 0.578%, nearing its historical low of 0.541% from March 9.




Date/Time(Central)IndicatorPeriodEstimateActualPriorRevised
7/14/2020 7:30 AMConsumer Price Index (MoM)Jun0.5%---0.1%--
7/14/2020 7:30 AMCPI (MoM) Ex. Food & EnergyJun0.1%---0.1%--
7/14/2020 7:30 AMConsumer Price Index (YoY)Jun0.6%--0.1%--
7/14/2020 7:30 AMConsumer Price Index (YoY)Jun1.1%--1.2%--
7/15/2020 6:00 AMMBA Mortgage Apps.10-Jul----2.2%--
7/15/2020 7:30 AMImport Price Index (MoM)Jun1.0%--1.0%--
7/15/2020 7:30 AMEmpire Manf.Jul7.7---0.2%--
7/15/2020 8:15 AMCapacity UtilizationJun67.7%--64.8%--
7/15/2020 8:15 AMIndustrial ProductionJun4.3%--1.4%--
7/15/2020 1:00 PMFed's Beige Book Released
7/16/2020 7:30 AMRetail SalesJun5.0%--17.7%--
7/16/2020 7:30 AMRetail Sales Ex-AutosJun5.3%--12.4%--
7/16/2020 7:30 AMPhiladelphia Fed IndexJul20.0--27.5--
7/16/2020 7:30 AMInitial Jobless Claims11-Jul1250k--1314k--
7/16/2020 7:30 AMContinuing Jobless Claims4-Jul17500k--18062k--
7/16/2020 9:00 AMBusiness InventoriesMay-2.3%---1.3%--
7/17/2020 7:30 AMBuilding PermitsJun1300k--1220k1216k
7/17/2020 7:30 AMHousing StartsJun1174k--974k--
7/17/2020 9:00 AMU of Mich. Consumer ConfidenceMay79.1--78.1--
CloseChange
Bond Contract0.000.00
CRB Index0.000.00
Dollar Index0.000.00
Dow Jones0.000.00
Gold0.000.00
1 Month LIBOR0.18-0.01
3 Month LIBOR0.270.00
Crude Oil0.000.00
TermClosing YieldDaily Price ChangeCurrent YieldPrice Change
Today - 7:30am
3MO0.13%0.000.13%0.00
6MO0.15%0.000.14%0.00
12MO0.15%0.000.14%0.00
2YR0.16%0.500.14%0.75
3YR0.19%0.750.16%1.25
5YR0.30%2.750.27%2.50
10YR0.64%15.500.59%8.00
30YR1.33%66.501.27%36.00
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