Market Insights 10/8/2019

U.S. equities declined amid tempered optimism of a U.S.-China trade deal with talks set to resume in Washington this week, as the U.S. blacklist of some of China’s tech companies is one of the issues that is adding another wrinkle to the upcoming meeting.

Treasury yields were mostly lower amid the dampened trade optimism and as U.S. wholesale price inflation unexpectedly declined and small business optimism slipped, while the U.S. dollar inched higher, gold gained ground, but crude oil prices ticked lower.

The Markets…

The Dow Jones Industrial Average fell 314 points (1.2%) to 26,164

The S&P 500 Index lost 46 points (1.6%) to 2,893

The Nasdaq Composite decreased 133 points (1.7%) to 7,824

In moderate volume, 803 million shares were traded on the NYSE and 1.9 billion shares changed hands on the Nasdaq

WTI crude oil nudged $0.12 lower to $52.63 per barrel and wholesale gasoline gained $0.01 to $1.58 per gallon

The Bloomberg gold spot price increased $10.34 to $1,503.84 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—was up 0.2% at 99.13

Wholesale price inflation cools, small business optimism declined more than expected

The Producer Price Index (PPI) showed prices at the wholesale level in September declined 0.3% month-over-month, below the Bloomberg forecast calling for it to match August’s unrevised 0.1% rise. The core rate, which excludes food and energy, also declined 0.3% m/m, versus expectations calling for a 0.2% increase and compared to August’s unadjusted 0.3% increase. Y/Y, the headline rate was 1.4% higher, versus projections to match August’s 1.8% increase. The core PPI rose 2.0% y/y last month, south of estimates calling for an unchanged reading from August’s unrevised 2.3% gain.

The National Federation of Independent Business (NFIB) Small Business Optimism Index for September declined to 101.8 from August’s unrevised 103.1 level, and expectations of a decrease to 102.0. NFIB President and Chief Executive Officer (CEO), Juanita Duggan noted, “As small business owners continue to invest, expand, and try to hire, they’re doing so with less gusto than they did earlier in the year, thanks to the mixed signals they’re receiving from policymakers and politicians,” adding that “All indications are that owners are eager to do more, but they’re uncertain about what the future holds and can’t find workers to fill the jobs they have open.”

Treasuries were mostly higher, as the yield on the 2-year note was down 5 basis points (bps) to 1.41%, the yield on the 10-year note lost 2 bps to 1.53%, while the 30-year bond rate was flat at 2.04%.

Europe lower, Asia higher as U.S.-China trade discussions eyed along with data

European equities finished lower, with the global markets treading cautiously ahead of this week’s U.S.-China trade talks in Washington, with some skepticism appearing to resurface regarding what the negotiations could yield. Also, U.K. Brexit concerns continued to ramp-up ahead of the October 31st deadline, with negotiations with the U.K. and European Union reportedly being close to breaking down. The British pound saw heavy pressure versus the U.S. dollar and the euro was slightly lower, while bond yields in the region were mostly lower.

Stocks in Asia finished mostly higher as the markets focused on this week’s trade talks between the U.S. and China though some caution remained regarding if a comprehensive deal can be reached, with the U.S. blacklisting some Chinese tech companies.

Chinese markets returned to action following a week-long holiday break, gaining ground along with shares in Hong Kong. Japanese equities rose, with the yen giving back some of a recent advance, while South Korean and Australian securities also increased.