US Stock Market Overview – Stocks Rise Led by Technology Shares, Energy Bucks the Trend

Solid GDP lifts riskier assets
David Becker
E-mini Dow Jones Industrial Average

US stocks moved whipsawed between positive and negative territory for most of the trading session, but the major averages ended in the black.  Stocks were initially buoyed following a stronger than expected US GDP report. This was offset by a worse than expected US housing report. Sectors were mixed, with technology shares leading the broader markets higher while Energy shares as the worst performers as a larger than expected increase in gasoline inventories weighed on crude oil prices.

Crude Drops Nearly 4% Weighing on Energy Shares

Energy shares dropped sharply on Thursday following a larger than expected build in both gasoline and natural gas. According to the Energy Information Administration, US commercial crude oil inventories decreased by 0.3 million barrels from the previous week. Gasoline inventories increased by 2.2 million barrels last week and are about 1% above the five year average for this time of year. Expectations were for a small draw. Distillate fuel inventories decreased by 1.6 million barrels last week and are about 5% below the five year average for this time of year. Total commercial petroleum inventories decreased last week by 1.6 million barrels last week.

Demand continues to slide. Total product demand during the last month averaged 20.3 million barrels per day, down by 2.0% from the same period last year. During the prior month, gasoline demand averaged 9.5 million barrels per day, down by 2.2% from the same period last year. Distillate fuel demand averaged 4.0 million barrels per day over the past four weeks, down by 2.6% from the same period last year.

GDP Beats Expectations

US growth rose 3.1% in the first quarter better than expected. Q1 gross domestic product beat the 3% expectations but was lower than the initial 3.2% projection from the Commerce Department. The decrease came due to downward revisions to nonresidential fixed and private inventory investment, two key drivers to GDP. The second revision also showed a change to personal consumption expenditures. Corporate profits also weakened, falling 2.8% across all companies. Inflation indicators also were weaker than expected, with core personal consumption expenditures up just 1.03%.

Jobless Claims Edged Higher

The Labor Department on Thursday reported that jobless claims rose 3,000 to 215,000 for the week ended May 25. Data for the prior week was revised to show 1,000 more applications received than previously reported. Expectations were for claims to rise to 215,000. The four-week moving average of initial claims, fell 3,750 to 216,750 last week.

Pending Home Sales Decline

Pending Home Sales were 2% lower compared with April 2018, the 16th straight month of annual declines. Pending home sales are sales that are in contract. Buyers this spring have had the benefit of lower mortgage rates. The average rate on the 30-year fixed is closer to 4% and has remained that way since March.

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