US Stock Market Overview – Stocks Slip as Trade Deal Negotiations Stall; Productivity Declines

US stocks were mixed on Wednesday moving sideways for most of the trading session. Positive sentiment was eroded by news that a trade deal was making slower than expected progress. That took some of the shine out of equities. This in conjunction with a surprise decline in US productivity helped volatility rise as equity prices eased. Sectors were mixed, driven higher by consumer staples and utilities which are defensive sectors. Energy bucked the trend. Energy shares were driven lower by a decline in oil prices following the US government’s inventory report from the Department of Energy.

Productivity Drops

For the first time in 4-years productivity declined. The Labor Department reported on Wednesday that nonfarm productivity, which measures hourly output per worker, fell at a 0.3% annualized rate in the Q3. The last drop that was sharper was in the fourth quarter of 2015. Expectations had been for productivity growth of 0.9% during the quarter. With the revisions, labor productivity was 1.4% higher in the third quarter than in the same period of 2018. Labor productivity also declined in the factory sector for the second straight quarter. Unit labor costs, rose at a 3.6% rate in the third quarter. Hours worked rose at a 2.4% rate, while output was up 2.1%.

Energy Shares Drop as Oil Declines

Oil prices moved lower on Wednesday following the Department of Energy’s inventory report. According to the EIA, US crude oil inventories increased by 7.9 million barrels from the previous week. Expectations were for a 1.9-million-barrel rise. Gasoline inventories decreased by 2.8 million barrels last week and are about 1% below the five year average for this time of year. Distillate fuel inventories decreased by 0.6 million barrels last week and are about 9% below the five year average for this time of year. Total petroleum inventories increased last week by 3.9 million barrels last week.

Demand remains positive as total product demand over the last month rose 2.4% year over year. Over the past month, gasoline demand averaged 9.5 million barrels per day, up by 2.7% from the same period last year. Distillate fuel demand averaged 4.3 million barrels per day over the past four weeks, up by 2.8% from the same period last year. Jet fuel product supplied was up 7.5% compared with the same four-week period last year.