Stocks ended a volatile week modestly lower. Stocks fell sharply on Tuesday after May U.S. crude oil futures traded negative for the first time. The current excess inventories have nearly filled all storage and the OPEC+ cuts are not scheduled to start until May. Nearly three dozen ships are currently located off the coast of California waiting to unload.
The June Light Crude Oil Futures ended at $17.13 a barrel. However there is the possibility of another negative futures pricing event when June futures expire in May.
Also helping stock prices, Congress approved and the President signed an additional $484BN coronavirus-relief package on Friday. This bill includes:
$310BN for the Paycheck Protection Program for forgivable loans.
$60BN for small and mid-sized community lenders
$60BN for Economic Injury Disaster Loans and Grants
$75BN for Hospitals
$25BN for Covid-19 testing
Absent from the legislation is any funding for state and local governments, many of which are close to running out of funds, or any support for the oil industry.
Looking to the week ahead, it will be a very busy week for Q1 earnings reports. As we’ve seen so far many companies have posted sharp drops in Q1 earnings and many companies have declined to provide forward guidance as it is unknown how quickly and completely the virus restrictions will be removed. Many companies have suspended share buybacks and many have announced dividend cuts.
Treasury yields fell with the 30-year bond ending at 1.165% and the 10-Year note at 0.602%. Natural gas rose to $1.873 per MMBTUs. The U.S. dollar rose against a basket of currencies and gold prices rose to $1741.80 an ounce.
In economic numbers this week:
- Japan reported that exports fell 11.7% in March and imports fell 5.0%. Japan’s trade surplus fell 99%.
- The National Association of Realtors reported sales of existing homes fell 8.5% in March, the biggest monthly decline since November 2015. Keep in mind that sales closing in March were likely started in prior months.
- The Commerce Department reported durable goods orders fell 14.4% in March. February was revised up to a gain of 1.1%. Civilian aircraft orders fell the most while core capital goods, a measure of business purchases of equipment fell a more modest 0.2%.
- The Labor Department reported first time jobless claims in the week ending March 13th rose another 4.43MM in the prior week. The previous week was revised to a smaller 5.25MM. The total new claims for the past five weeks now totals 26.5MM.
- Factset reported that with 24% of the S&P 500 Q1 earnings reporting, the blended earnings decline is 15.8% from Q1 2019.
- The EIA weekly oil report is here wpsrsummary Also, the EIA reported in the past week:
- Field production of crude oil dropped from 12.3MM barrels to 12.2MM barrels per day.
- Natural gas storage rose by 43BN cubic feet and is above the five year average at this time of year.
- Baker Hughes reported the number of active oil rigs fell 60 to 378 and the number of active gas rigs fell 4 to 85.
Source: Baker Hughes
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