Daily Market Color May 25, 2018Oil Tumbles on Increased OPEC Output Expectations Look Beyond the Headline of Durable Goods Headline durable goods decreased by 1.7% month-over-month for April, a greater drop than median forecasts of a 1.3% decrease, dragged down by a 6.1% slide in the orders for transportation equipment (specifically commercial aircraft, which can be volatile). Core capital goods orders (nondefense, excluding aircrafts) actually outperformed +0.9% (+0.7% expected), and the prior month’s reading was revised higher from a gain of 0.1% to a gain of 0.4%. Adding to the steady outlook, core capital shipments reversed course and were up after last month’s decline, rising 0.8%, more than median forecasts of +0.4%. While the headline number is a disappointment, the overall report is supportive of continued strength in business investment. A Volatile 24 Hours of Rhetoric 24 short hours ago there was concern that the abrupt cancellation of the June 12th summit planned between the United States and North Korea would lead to a deterioration of not only the relationship between the United States and North Korea but also impact the United States relationship with others in the region including South Korea, Japan and China. However, according to President Trump, his administration is still in talks with North Korea and the June 12th summit could still take place. The President tweeted “Very good news to receive the warm and productive statement from North Korea. We will soon see where it will lead, hopefully to long and enduring prosperity and peace. Only time (and talent) will tell!” Equity Markets Quiet as Oil Drops US stocks were mostly unchanged at the time this piece was written with the exception of the energy sector, which was down on the news of increased Russian and OPEC production. Crude oil futures fell the most since June 2017: -4.2% to $67.75/barrel on this news. All three major indices were within 0.3% from where they opened the day, on limited volume ahead of the three day long Memorial Day weekend. The S&P lost 0.30%, the DJIA lost 0.28%, however, the NASDAQ was slightly higher gaining 0.15%. The US Treasurys rallied as yields dropped about 5bps across the curve on the day, with the 10 year note closing at a yield of 2.93%. The US Dollar (USD) was up 0.5% vs. both the Euro (EUR) and the Pound (GBP).