US Stock Market Overview – Stocks Rally, Led by Energy as Dorian is Upgraded to a Hurricane

Crude oil inventories sank more than expected lifting energy shares
David Becker
S&P 500 daily chart, August 27, 2019

US stock prices moved higher led by a rally in the Dow Industrials, as US rates continued to move lower. A combination of concern that the US economy will fall into a recession and geopolitical risks, helped bush yields to all-time and multi-year lows. Most sectors were higher led by a rally in energy shares, which were buoyed by robust crude oil prices. Both crude oil and natural gas rose on Wednesday as Dorian was upgraded to a Hurricane. A larger than expected draw in crude oil inventories helped buoy energy values.

PM Boris Johnson asks Queen to Suspend Parliament

Geopolitical risks rose and the Pound dropped sharply on Wednesday as UK Prime Minister Johnson is reportedly seeking an extended suspension of Parliament ahead of the Brexit deadline.  Under the plan, Parliament would be suspended from September 12 until the Queen’s Speech October 14.  All legislative matters would be suspended. The geopolitical risk helped buoy the yellow metal despite a rising dollar. Johnson is looking to suspend parliament so there is no competing voice that would object to a hard Brexit. He appears not to believe he can get a hard Brexit across the finish line if parliament is in session.

The US long end Yield Hits All-Time Low

The 30-year Treasury bond yield fell to an all-time low 1.91% Wednesday as yields around the world slid to multi-year or record lows. US interest rates followed a global move lower, with the Japanese 10-year yield falling to a new negative three-year low and the German 10-year bund yield sliding to its own record, minus-0.73%. Additionally, the benchmark 10-year Treasury note yield in the US, which influences everything from business loans to home mortgages, was at 1.45% Wednesday. That’s below the 2-year yield of 1.5%, and the move has been signaling recession.

Crude Oil Inventories Declined More than Expected

US crude oil inventories decreased by 10.0 million barrels from the previous week. Gasoline inventories decreased by 2.1 million barrels last week and are about 3% above the five year average for this time of year. Distillate fuel inventories decreased by 2.1 million barrels last week and are about 4% below the five year average for this time of year. Total commercial petroleum inventories decreased last week by 11.2 million barrels last week, which was larger than expected.

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