Market Insights 5/9/2019

U.S. equities finished in the red, albeit off the lows of the day, as trade worries continued to escalate ahead of the midnight deadline for increased tariffs on Chinese goods.

Treasury yields fell, along with the U.S. dollar, amid a cooler-than-expected wholesale price report, a smaller-than-expected decline in jobless claims, and a trade deficit that was in line with estimates.

Elsewhere, crude oil prices were lower and gold was higher.

The Markets….

The Dow Jones Industrial Average declined 139 points (0.5%) to 25,828

The S&P 500 Index fell 9 points (0.3%) to 2,871

The Nasdaq Composite decreased 33 points (0.4%) to 7,911

In moderate volume, 833 million shares were traded on the NYSE and 2.5 billion shares changed hands on the Nasdaq

WTI crude oil lost $0.42 to $61.70 per barrel and wholesale gasoline was unchanged at $1.98 per gallon

The Bloomberg gold spot price increased $3.17 to $1,284.05 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.2% lower at 97.40

Wholesale price inflation cooler than expected, trade deficit widens slightly

The Producer Price Index (PPI) showed prices at the wholesale level in April rose 0.2% month-over-month (m/m), compared to the Bloomberg forecast of a 0.3% gain, and following March’s unrevised 0.6% rise. The core rate, which excludes food and energy, was up 0.1% m/m, versus expectations of a 0.2% gain, and after March’s unadjusted 0.3% increase. Y/Y, the headline rate was 2.2% higher, below projections of a 2.3% rise and matching March’s increase. The core PPI rose 2.4% y/y last month, below estimates of a 2.5% gain and in line with March’s rise.

The trade balance showed that the deficit widened to $50.0 billion in March, compared to estimates of $50.1 billion. February’s deficit was revised lower to $49.3 billion. Exports were up 1.0% m/m at $212.0 billion, while imports gained 1.1% to $262.0 billion.

Weekly initial jobless claims declined 2,000 to 228,000, compared to estimates of 220,000, and versus the prior week’s unrevised 230,000 level. The four-week moving average rose 7,750 to 220,250, while continuing claims increased by 13,000 to 1,684,000, north of estimates of 1,670,000.

Treasuries rose, as the yield on the 2-year note fell 4 basis points to 2.26%, the yield on the 10-year note dropped 3 bps to 2.45%, and the 30-year bond rate declined 2 bps to 2.87%. The U.S. Dollar Index also saw pressure. The stock markets extended a weekly drop amid flared-up trade concerns after the U.S. threatened to increase tariffs on Chinese goods tomorrow, with U.S.-China talks resuming today.

More inflation data will grace tomorrow’s economic calendar, with the Consumer Price Index (CPI) slated for release, forecasted to show the headline rate and the core rate, which excludes food and energy, rose 0.4% and 0.2% m/m, respectively, during April.

European and Asian markets fall as trade fears mount

European equities were solidly lower, with the global markets remaining hampered by increased U.S.-China trade worries as talks are set to resume today in Washington. Comments from President Trump last night at a rally further dampened hopes that a deal can be cobbled together before a midnight deadline to increase tariffs on the Asian nation. Automakers, which are heavily exposed to China, saw heavy pressure in the wake of increased tensions. Economic news in the region was light, but possibly adding to the anxiety, as industrial production in Spain fell and by a much larger degree than forecasts. The euro and British pound rose versus the U.S. dollar, while bond yields in the region were mixed.

Stocks in Asia finished mostly lower amid angst over the continued escalation in trade tensions between the U.S. and China, with talks resuming today in Washington.

Worries intensified following President Trump’s comments last night that China “broke the deal”, dampening hopes that a deal can be reached before new tariffs go into effect tomorrow. Equities traded on the mainland and in Hong Kong tumbled, with the markets also digesting inflation statistics from the Asian nation that showed consumer prices rose in line with forecasts but wholesale prices were a little hotter than expected.

Stocks in Japan fell, with the yen losing ground, and as a read on consumer confidence ticked slightly lower. South Korean securities plunged, and Indian listings moved to the downside. Markets in Australia were able to buck the trend, finishing with modest gains.

Tomorrow’s international economic calendar will include lending statistics and new yuan loans from China, labor statistics and household spending from Japan, trade data from Germany, industrial production from France and Italy, retail sales from the Eurozone, as well as industrial production and GDP from the U.K.