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David Becker
S&P 500 daily chart, July 11, 2019

US stocks traded on the defensive on Wednesday as volatility ticked up. Energy shares traded lower as crude oil continued to move down. A larger than expected build in gasoline and distillate inventories were the catalyst to drive oil prices down. Gold prices broke out following comments from Ray Dalio on purchasing gold. This helped the miners move higher. The VIX volatility index ticked up to 13.5, bouncing near the lows at 12. Most sectors were lower, driven down by Industrials and Energy, utilities bucked the trend.

Energy Shares Drop with Crude Oil

Crude oil prices were under pressure as an unexpected build in products inventories, weighed on the petroleum complex. The EIA reported that crude oil inventories decreased by 3.1 million barrels from the previous week, in line with expectations. Gasoline inventories increased by 3.6 million barrels last week compared to expectations that it would decline by 2.5-million barrels. Distillate fuel inventories increased by 5.7 million barrels last week. Total commercial petroleum inventories increased last week by 11.7 million barrels last week.

Demand remains buoyed. Total products demand the last four-week period averaged 20.8 million barrels per day, up by 0.6% from the same period last year. During the last month gasoline demand averaged 9.5 million barrels per day, down by 1.7% from the same period last year. Distillate fuel demand averaged 3.7 million barrels per day over the past four weeks, down by 4.9% from the same period last year. Jet fuel product supplied was up 2.1% compared with the same four-week period last year.


Bank of America Beat

Bank of America reported financial results on Wednesday. The US’s second-largest bank by assets, posted a profit of $7.35 billion, an 8% increase from the $6.78 billion a year earlier. Per share, earnings were 74 cents. Analysts had expected 71 cents per share. Second-quarter revenue was $23.08 billion, up from $22.55 billion a year ago.

Miners Surge on Dalio Gold Comments

Gold miners surged higher in tandem with the yellow metal as Ray Dalio, founder of the world’s largest hedge fund, wrote in a LinkedIn post that investors have been pushed into stocks and other assets that have equity-like returns. As a result, too many people are holding these types of securities and likely to face diminishing returns. Gold will outperform according to Dalio as investors look toward alternative assets. Dalio said that most investors are underweighted in such assets, meaning that if they just wanted to have a better balanced portfolio to reduce risk, they would have more of this sort of asset.

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