Daily Market Color June 20, 2018Markets Regain Footing Home Sales Decline as Prices, Rates Rise Sales of previously owned homes in the US fell for a second consecutive month during May, weighed down by the continual buildup in prices, tightening of inventory and increasing borrowing rates. Existing home sales last month totaled a seasonally adjusted annual rate of 5.43 million, missing expectations of 5.52 million and falling 0.4% from the prior month’s level. Compared to a year earlier, sales of previously owned homes were down 3%. Median sale prices increased 4.9% YoY in May to $264,800 – a record high. There were 1.85 million homes in inventory last month according to the report (down 6.1% from a year ago), corresponding with a 4.1-month supply of homes on the market based on the current sales pace. Uncertainty in Increased Crude Production As the de facto leader of the global crude oil production cutting agreement, Saudi Arabia has been informally working with other OPEC allies to determine an ideal amount to boost output ahead of this Friday’s meeting. Officials from Saudi Arabia have promoted a 500,000 barrel per day increase between the group as the “goldilocks” amount at this point in time, but that figure has received pushback from both ends. Russia, the world’s third largest producer, favors a larger bump in production closer to 1.5 million barrels per day, while Iran, who is subject to a number of US sanctions, has argued for no increase at all. Ultimately, much of the excess capacity to ramp up production lies within Saudi Arabia (see chart below). Until Friday’s decision, crude oil prices are expected to continue shifting on rumors of which way the faction is leaning. WTI crude climbed 1.75% on the day to $66.20/barrel. Markets Keep Calm and Carry On After a wild ride the past few days on the escalating trade tensions between the United States and China, the markets caught their breath today. The Nasdaq lead the way higher with a 0.72% gain, while the S&P posted a more modest 0.17% gain. The DJIA was down on the day losing 0.17%, dragged down by the performance of the financial sector. Treasuries sold off throughout the day — yields on treasuries across the curve were up 2-5 bps with the 10-year closing at a yield of 2.94%. In foreign exchange markets, the US Dollar (USD) gained 0.1% vs the Euro (EUR), but was down 0.1% vs the Pound (GBP). Gold was off on the day (-0.4%) closing at $1,269.64/oz.