Market Insights 5/14/2019

U.S. equities finished with solid gains, paring some of a recent tumble that has come courtesy of escalated U.S.-China trade tensions.

Comments from President Trump of expectations for a “fruitful” meeting with Chinese President Xi at the June G-20 summit may have calmed nerves a bit to aid in the rebound.

Treasury yields were modestly higher after falling sharply yesterday, and the U.S. dollar also gained ground, as crude oil prices rose and gold was slightly lower.

The Markets…

The Dow Jones Industrial Average rose 207 points (0.8%) to 25,532

The S&P 500 Index increased 23 points (0.8%) to 2,835

The Nasdaq Composite gained 88 points (1.1%) to 7,735

In moderate volume, 769 million shares were traded on the NYSE and 2.0 billion shares changed hands on the Nasdaq

WTI crude oil added $0.74 to $61.78 per barrel and wholesale gasoline was $0.02 higher at $1.96 per gallon

The Bloomberg gold spot price decreased $3.19 to $1,296.72 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.2% higher at 97.53

Small business optimism improves more than expected, import prices cooler than forecasted

The National Federation of Independent Business (NFIB) Small Business Optimism Index for April rose to 103.5 from March’s unrevised 101.8 level, and versus the Bloomberg expectation of an increase to 102.0. The report showed sales improved in April, the inventory soft spot seen in last month’s report rebounded, and profit trends posted a very solid advance. Job creation plans gained, hiring remained strong, and expectations for sales, business conditions, and credit conditions all improved.

The Import Price Index rose 0.2% month-over-month for April, below projections of a 0.7% gain, and following March’s unrevised 0.6% gain. Compared to last year, prices were down 0.2%, versus forecasts of a 0.3% gain and compared to March’s upwardly-revised 0.1% increase.

Treasuries dipped, as the yields on the 2-year and 10-year notes, along with the 30-year bond, ticked 1 basis point (bp) higher to 2.19%, 2.42% and 2.85%, respectively. Bond yields recovered slightly from yesterday’s drop and the U.S. Dollar Index also modestly rebounded. The stock markets bounced back after yesterday’s selloff, which was the largest one-day fall for the S&P 500 since January 3rd.

Tomorrow’s economic calendar will be chock full of reports, beginning with advance retail sales, forecasted to have gained 0.2% m/m during April following March’s surprising 1.6% jump, while ex-autos sales are estimated to have risen 0.7%. Industrial production and capacity utilization is also on tap, with economists projecting a flat reading on production for April and utilization to tick lower to 78.7%.

Europe higher following yesterday’s fall, Asia mixed

European equities were higher, rebounding after yesterday’s global market selloff that came as the trade war between the U.S. and China escalated, with both parties increasing tariffs on goods of each country. U.S. President Donald Trump’s comments that he expects a meeting with Chinese President Xi at the June G-20 summit in Japan to be a “very fruitful meeting” appeared to help the market recover.

European stocks shrugged off March data showing Eurozone industrial production dipped and U.K. employment growth was smaller than expected, while German investor sentiment for May was mixed as confidence in the current situation improved more than expected but the expectations component unexpectedly fell. The euro and British pound were lower versus the U.S. dollar and bond yields in the region were mixed.

Stocks in Asia finished mixed, with the global markets falling yesterday as trade tensions escalated with China retaliating with increased tariffs on U.S. goods after the U.S. raised levies on Chinese goods on Friday. Mainland Chinese equities and those traded in Hong Kong fell, with the latter returning to action following yesterday’s holiday.

Stocks in Japan declined, as the yen pared yesterday’s rally, while Australian securities also lost ground.