A Roller Coaster Start To July Trading
It’s a roller-coaster start to July trading as strong overnight gains moved to early morning losses, then back to gains in just a couple of hours. This type of back and forth action is indicative of a market that’s struggling to find direction as good economic news is offset by more bad news on COVID-19 counts.
A large decline in oil inventories of more than eight million barrels reported by the API had oil prices rallying through the overnight session, with WTI trading north of $40 again, only to see those gains wiped out in the past hour. Refined products had a similar pattern, trading up three to four cents overnight only to see those gains wiped out this morning. The API showed gasoline stocks declined nearly 2.5 million barrels last week, while distillates grew by 2.6 million barrels. The EIA’s report is due out at its normal time this morning.
The bulk of the brief selloff in energy and equity futures followed closely behind the ADP payroll report that showed June private jobs increasing by 2.3 million, and May’s estimate seeing a huge revision from 2.7 million jobs lost to three million jobs gained. It seemed that there was an immediate widespread knee jerk reaction to that data – perhaps someone forgot to program their trading algorithm to deal with negative numbers again – that has since faded. While this morning’s swing may be a one-off event, it could also signal that we’re returning to a “bad news is good news” market, similar to what was experienced for several years following the 2008 financial crisis, as the market cheered anytime it looked like negative economic data would encourage more stimulus from the FED.