US Stock Market Overview – Stocks Rally, Led by Utilities, Energy Shares Bucked the Trend

US stocks moved higher on Wednesday, but defensive shares were the best performers, as US yields rebounded sharply despite a worse than expected jobs report. The market price action was somewhat confusing. Gold prices whipsawed and gold mining stocks continued to outperform. Energy shares were the worst performing sector tumbling along with Crude oil which sold off 3.4%, after a larger than expected inventory build reported by the Energy Information Administration (EIA). Most sectors were higher, with Utilities outperforming rising 2.15%, energy shares bucked the trend declining 1.45%.

Energy Shares Were Hammered

Despite the broader market rebound, energy shares took it on the chin, following a report from the Energy Department which should a larger than expected build in stockpiles. The EIA reported that crude oil inventories increased by 6.8 million barrels from the previous week. Expectations were for a 2-million barrel increase. Gasoline inventories increased by 3.2 million barrels last week and are about 2% above the five year average for this time of year. Distillate fuel inventories increased by 4.6 million barrels last week. Total commercial petroleum inventories increased last week by 22.4 million barrels last week. This is an outsized number and prices are headed for support near an upward sloping trend line near $45.

Imports Surged

Crude oil imports averaged 7.9 million barrels per day last week, up by 1,065,000 barrels per day from the previous week. This was likely the reason behind the larger than expected build in crude oil stockpiles. Demand was lower. The EIA reported that total product demand over the past month averaged 20.0 million barrels per day, down by 0.6% from the same period last year. Gasoline demand averaged 9.4 million barrels per day, down by 1.3% from the same period last year. Distillate fuel demand averaged 3.9 million barrels per day over the past four weeks, down by 0.8% from the same period last year.

Jobs Data Was Weaker than Expected

US private job creation eased substantially in May. ADP and Macro Economic Advisors reported that companies added just 27,000 new positions during the month, well below expectations which were for an increase of 173,000. The prior month was revised lower to 270,000 and the average of the two months remains near a robust 150,000.

Most of the declines came in the small business space with fewer than 50 employees, which reported a loss of 52,000 jobs, and in the goods-producing sector, which saw a decline of 43,000. Almost all of the small business loss came at firms with fewer than 20 employees, while the big loser in the goods sector was construction, where 36,000 positions were lost. Large companies withstood the slowdown, adding 68,000 jobs, while those with 50 to 499 employees contributed 11,000.