Mid-Market Update: Stocks rise on Stimulus and Oil rebound, Oil higher after Trump warns Iran, Gold rises

US stocks snapped this week’s precipitous two-day slide following a strong rebound with oil prices, continued optimism that most of the US economy will reopen by the summer, in-line earnings, and fresh worldwide stimulus.  Nothing groundbreaking was discovered today, so it should not surprise anyone if this rebound fizzles out.

Treasury Secretary Mnuchin is hopeful that the next wave of additional funds for small businesses might be enough and that most if not all the US economy will open later this summer.  Earnings results are pretty much getting a pass as everyone seems to be posting in-line results for the first quarter and withdrawing their guidance.  The big four earnings reports from Kimberly Clark, Biogen, Delta and AT&T are all seeing their respective shares trade in the red.  Fresh stimulus from the US, Singapore, South Korea and Mexico are also keeping the safety net in place for global equities. 

Oil

Today’s surge in oil prices stemmed from some short covering that occurred after President Trump’s threatening tweet to Iran and after another massive oil inventory build reminded traders that tank tops will get filled in early May. 

President Trump continues to be active in trying to tweet oil prices higher. Oil will continue to remain heavy on demand fears and will shrug off his latest tweets about filling up the SPR without congressional approval, funding US oil and gas companies, and threats to shoot down any Iranian gunboats that pose a threat. 

On paper, this was a pretty bearish EIA weekly crude inventories report, but current market forces appear to be taking a break with uncontrolled selling.  US crude stockpiles rose 15.0 million barrels last week, modestly above consensus estimate, and down from prior week’s record high of 19.25 million barrels.  Backing out storm-related shut-ins oil production only dropped 100,000 barrels a day.  US crude exports gave back last week’s over half a million-barrel rise, while imports fell to the lowest levels since 1992. 

Oil volatility will remain high, as short squeezes will likely deliver excessive rebounds.  Now is not the time to be constructive on oil prices.  Until headlines flow that key storage hubs are filled, oil majors announce large production cuts, and smaller shale companies go under, oil prices should remain heavy. 

Gold

Gold traders have a handful of reasons to choose from on why prices are surging today.  Gold is mainly higher on increased safe-haven demand as investors fear the global recession that is upon markets could be much more severe than initially expected.  The collapse in oil prices will continue to weigh on key parts of the US economy and on credit markets. 

Gold is also benefiting from the announcements of fresh monetary and fiscal stimulus all around the world.  Mexico had an intra-policy meeting and the government announced additional measures to spur the recovery.  Singapore unveiled an additional $3.8 billion in stimulus.  South Korea is working on a third extra budget to provide additional help for key industries and job retention. 

Gold is now back comfortably above the $1700  level and still has room for another attempt at $1800 later this week. 

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