Market Review: October 23, 2024

Today's data points highlight softness in the U.S. housing market, alongside a sharp increase in crude oil inventories, signaling weaker demand in the energy sector. Meanwhile, bond market yields rose significantly, reflecting higher borrowing costs and increased investor appetite for U.S. bonds.



Today's Event Overview

• Existing Home Sales (Sep) fell to 3.84M, slightly missing the forecast of 3.88M and matching the previous reading, indicating continued weakness in the housing market.
• Existing Home Sales (MoM) (Sep) saw a decline of -1.00%, an improvement from the previous month’s -2.00%, but still indicative of a contraction in home sales.
• Crude Oil Inventories showed a significant build of 5.474M barrels, much higher than the forecasted 0.800M, pointing to weaker demand or increased production.
• Cushing Crude Oil Inventories saw a slight drawdown of -0.346M barrels, reversing the previous week's gain, but this did not offset the larger national build.
• 20-Year Bond Auction resulted in a yield of 4.59%, up from 4.04%, indicating higher demand for U.S. bonds and potentially higher borrowing costs.

Impact Analysis

• Impact on USD:
  The USD is likely to benefit from the rise in bond yields, as higher returns attract foreign investment into U.S. assets. However, the weaker housing data and the sharp build in crude oil inventories may offset some of this bullishness, as both signal slower economic momentum.
• Impact on Gold:
  Gold may experience bearish pressure due to rising bond yields, which increase the opportunity cost of holding non-yielding assets like gold. The large crude oil inventory build also reduces inflationary pressures, which could further weigh on gold.
• Impact on Equities Futures:
  Equities futures may face bearish pressure, particularly in the real estate and energy sectors, as both the housing data and crude oil inventory build indicate weaker demand. Higher bond yields could also pressure equity valuations by raising borrowing costs for companies.

Today's data highlights the challenges facing the housing and energy sectors, with weaker home sales and rising oil inventories suggesting slowing demand. However, the bond market continues to attract investor interest, pushing yields higher, which could be supportive for the USD but negative for both gold and equities.