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North American News

US stocks close near session lows and another horrible day to the downside

  • NASDAQ falls -4.73%

The major US indices are all closing sharply lower as concerns about the economy and inflation way on values.

Target announced earnings before the open and they came in much weaker than expected as higher costs are starting to eat into the margins. The stock is ending the day down -$53.55 or -24.87%. Ouch.

If transportation/employee costs are hurting Target, a company like Amazon must be really feeling the pinch. It’s shares are down $-164 today or -7.12%.

A look at the final numbers are showing:

  • Dow industrial average down -1164.52 points or -3.57% at 31490.06
  • S&P index down -165.17 points or 4.04% at 3923.67
  • NASDAQ  down -566.36 points or -4.73% at 11418.16
  • Russell 2000 down -65.45 points or -3.56% at 1774.84.

None of the Dow 30 stocks closed positive on the day:

  • Walgreens, -8.39%
  • Coca-Cola, -6.95%
  • Walmart, -6.84%
  • Procter & Gamble, -6.15%
  • Nike, -5.7%

Verizon was the best performer at -0.14%

Other big losers on the day included:

  • Target, -24.87%
  • Dollar Tree, -14.42%
  • Costco, -12.45%
  • Chewy, -11.93%
  • Game Stop -8.94%
  • DoorDash -8.17%
  • AirBNB -8.06%
  • FedEx -8.01%
  • LYFT, -7.96%
  • Snap, -7.42%
  • Amazon, -7.16%

US treasury auctions off $17 billion of 20 year bonds at a high yield of 3.29%

  • WI level at the time of the auction was 3.292%
  • High  yield  3.29%
  • WI level at the time of the auction 3.292%
  • Tail -0.2 basis points vs six-month average -0.4
  • Bid to cover 2.5X vs. six-month average of 2.56X
  • Directs 16.43% vs. six-month average of 19.9%
  • Indirects 70.57% vs six-month average of 65.7%
  • Dealers 13% vs six-month average of 14.3%

The international market were strong buyers once again. However, domestic buyers were less than expectations.

US EIA weekly crude oil inventories -3394K vs +1383K expected

  • Weekly US petroleum inventory data
  • Prior was +8487K
  • Gasoline -4779K vs -1333K expected
  • Distillates +1235K vs 0K expected
  • Refinery utilization +1.8% vs +0.6% expected

API data released late yesterday:

  • Crude -2445K
  • Gasoline -5102K
  • Cushing -3071K
  • Distillates +1075K

Commodities

Gold finds a safe-haven bid

  • Gold higher by $8

Gold has jumped $8 in the past few minutes to $1822.

That puts it in a rare group of assets that appreciating today. It’s also a good signal that gold can rally on a day when US stocks are down 2.5%.

Silver Price Forecast: XAG/USD fails to conquer $22.00 and tumbles below $21.50

  • Overall, US dollar strength weighed on the precious-metals complex as silver fell in the New York session.
  • Fed’s Powell reiterates that the Fed will achieve the inflation target and says they would move “aggressively” to achieve it.
  • Silver Price Forecast (XAG/USD): It is downward biased, and as the RSI exits from oversold territory and aims lower, it puts in play a re-test to the YTD lows.

Silver spot (XAG/USD) is losing its ground, and it is falling on Wednesday, recording losses of almost 1%, courtesy of a buoyant greenback and a negative market mood that usually propels precious metals upwards. At $21.46, XAG/USD stays above $21.42, but failure at $22.00 might have opened the door for further losses.

A stronger US dollar and a “hawkish” Powell weigh on XAG/USD prices

The US Dollar Index, a gauge of the greenback’s measurement against a basket of six peers, is advancing some 0.42% in the day, sitting at 103.727, a headwind for XAG/USD. Contrarily, falling US Treasury yields, led by the 10-year benchmark note, are retreating ten basis points, sitting at 2.887%, which would usually hurt the buck and are being ignored by investors.

Another factor to consider is Fed Chair Jerome Powell’s Q and A event, held on Tuesday by the Wall Street Journal. Powell said that the Fed “needs to see” that inflation is coming down in a “clear and convincing way, and we’re going to keep pushing until we see that. If that involves moving past broadly understood levels of ‘neutral,’ we won’t hesitate at all to do that.” Furthermore, Powell added that if the US central bank fails to see that, “then we’ll have to consider moving more aggressively.”

Elsewhere, the US docket featured Building Permits and additional housing data, which came mixed. Building Permits rose higher than foreseen, but Housing Starts missed expectations as the US economy began to show signs of the Federal Reserve tightening.

Philadelphia’s Fed Patrick Harker would cross wires late in the day, followed by Thursday’s Initial Jobless Claims.

Silver Price Forecast (XAG/USD): Technical outlook

Meanwhile, XAG/USD’s price action depicts that the white metal bias is still downwards. As above-mentioned, the $22.00 barrier proved challenging to overcome, and with bears re-entering the market and the Relative Strength Index (RSI) at 34.76 aiming lower, a re-test towards the YTD lows at around $20.45 is on the cards.

With that said, the XAU/USD’s first support would be $21.00. A breach of the latter would expose the May 16 daily low at $20.84, followed by May 12 lows at $20.61, and then the YTD low at $20.45.

WTI crude oil futures settle at $109.59

  • Down -$2.81 or -2.5%

WTI crude oil futures for June delivery settled at $109.59. That’s down $-2.81 or -2.5%. The high for the day reached $115.42. The low extended to $108.46.

The June contract last day of trading is May 20 (Friday). Most of the trading is now in the July contract is trading at a discount of $106.55 currently.

The price action today was focused on the potential for slowdown in the economy on the back of tighter central bank policy.

The weekly crude oil inventory showed a larger than expected drawdown of -3.394M barrels. The expectations was for a build of 1.383M. The drawdown did not influence the price action. Sellers were intent on pushing the price lower today.


EU News

European equity close: Outside day

  • Closing changes for the main European bourses

The declines weren’t particularly terrible in Europe — particularly when compared to the US – but the outside day candles like in the DAX are a big concern.

  • Stoxx 600 -1.3%
  • German DAX -1.3%
  • UK FTSE 100 -0.9%
  • Spain IBEX -0.2%
  • French CAC -1.3%
  • Italy MIB -0.8%

Other News

Global debt hits record high of $305 trillion

  • IIF report

The Institute of International Finance reports that global debt topped $305 trillion in Q1 2022 as China’s debt increased by $2.5 trillion and the US by $1.5 trillion.

That’s a 75% increase since 2012.

My fear is that with central banks trimming balance sheets and leveraged buyers pushed out by rising rates, there will no longer be an appetite for holding that many bonds. That’s something that could push yields structurally higher, even when central banks stop hiking rates.

The IIF warns taht the most vulnerable sector may be emerging markets.

The good news is that the rebound in growth has helped to lower global debt to GDP to 348%, about 15 percentage points below the record from a year ago.


Cryptocurrency

Bitcoin nears $29,000 as the risk mood worsens

  • Lows of the day for bitcoin

The bounce in risk assets is coming undone, including in bitcoin.

Crypto has been a leading indicator of sentiment recently and the fall to a session low at $29,111 isn’t a great sign. In the big picture, it’s still within the recent $28,500 to $31,394 range but I’ll be watching $28,800. That was the low back in June 2021 and another break below it could target the spike low of $25,390 hit last week. What’s troubling is the lack of a strong bounce above $28,800 since it was taken out.

Goldman Sachs on stablecoins – expect them to be regulated and even supplanted

Goldman Sachs making some pints on stablecoins

  • current state of stablecoins shares similarity with private bank notes, which circulated as money in the 19th century and were later replaced by national bank notes subject to federal oversight
  • Stablecoin is a type of cryptocurrency pegged to other assets, often fiat currencies such as U.S. dollars.
  • Regulations for such coins “seems likely,”

Key point made by GS:

“The second key lesson from this experience is that while private and public money can coexist for a time, the private money system is eventually regulated and/or later supplanted by public money,” according to the analysts. Private bank notes were replaced by national bank notes after the National Banking Act was passed in 1863.