Market Insights 5/17/2019

U.S. equities finished lower in a volatile session, as investors weighed the continued uncertainty surrounding U.S.-China trade tensions, as well as some earnings results and upbeat economic data.

The Leading Index improved and consumer sentiment jumped to a 15-year high.

Treasury yields were mixed after overcoming early declines and crude oil prices were lower, while the U.S. dollar saw a modest gain and gold fell.

The Markets…

The Dow Jones Industrial Average decreased 99 points (0.4%) to 25,764

The S&P 500 Index was down 17 points (0.6%) to 2,860

The Nasdaq Composite dropped 82 points (1.0%) to 7,816

In moderate volume, 867 million shares were traded on the NYSE and 2.1 billion shares changed hands on the Nasdaq

WTI crude oil inched $0.11 lower to $62.76 per barrel and wholesale gasoline was down $0.01 at $2.05 per gallon

The Bloomberg gold spot price decreased $8.58 to $1,278.14 per ounce

The Dollar Index— a comparison of the U.S. dollar to six major world currencies—was up 0.1% at 97.99

Markets were lower for the week, as the DJIA fell 0.7%, the S&P 500 Index lost 0.8%, and the Nasdaq Composite declined 1.3%

Leading Indicators rise and consumer sentiment jumps to 15-year high

The Conference Board’s Index of Leading Economic Indicators (LEI) for April rose 0.2% month-over-month, matching the Bloomberg projection and compared to March’s revised 0.3% gain. None of the ten components of the index declined, with jobless claims, stock prices, credit and consumer expectations the major positive contributors.

The May preliminary University of Michigan Consumer Sentiment Index rose to 102.4 from April’s read of 97.2, where it was expected to remain. This was the highest level since 2004 as the consumer expectations portion of the survey jumped, while the current economic conditions component ticked higher. The 1-year inflation forecast rose to 2.8% from 2.5%, and the 5-10 year inflation forecast increased to 2.6% from the previous 2.3% rate.

Treasuries finished mixed after giving up an early advance, as the yield on the 2-year note was up 1 basis point at 2.20%, while the yield on the 10-year note ticked 1 bp lower to 2.39%, and the 30-year bond rate dipped 2 bps to 2.82%.

Europe broadly lower, Asia mixed after a recovery as trade concerns remain

European equities finished broadly lower following a recovery in the past couple sessions, as U.S.-China trade concerns lingered ahead of the weekend, while Brexit uncertainty festered as talks continue to fail to deliver any new progress. The euro and the British pound came under some pressure versus the U.S. dollar, while bond yields in the region were mostly lower.

Stocks in Asia finished mixed to close out a choppy week that saw the U.S. markets post a three-day rebound to erase Monday’s selloff as economic and earnings data pleased and trade concerns cooled a bit. U.S.-China trade uncertainty festered, exacerbated by U.S. President Donald Trump signing an executive order giving the Commerce Department authority to ban telecommunications network gear and services from foreign adversaries, which weighed on the Chinese markets with those traded on the mainland and Hong Kong solidly lower.

Stocks in Japan rose, with the yen holding onto yesterday’s decline during the session. Shares in South Korea declined, but markets in Australia moved to the upside with most sectors gaining ground to overshadow a decline in the financial sector.

Stocks dip in a choppy week amid data and escalated trade tensions

U.S. stocks led a global market selloff to begin the week as the U.S.-China trade dispute escalated. Global growth concerns also flared-up, with China and the U.S. both posting softer-than-expected retail sales and industrial production reports. However, the U.S. markets rebounded with a string of gains to trim Monday’s tumble as the U.S. eased trade concerns toward Japan and Europe by delaying imposing tariffs on auto imports, while the aforementioned disappointing dose of global economic data was countered by stronger-than-expected reads on U.S. jobless claims, regional manufacturing activity, small business optimism, homebuilder sentiment and housing construction activity, which preceded Friday’s positive Leading Indicators and consumer sentiment reports.

Q1 earnings season is pretty much in the books, Dow components Walmart Inc. and Cisco Systems Inc. delivered upbeat quarterly results to solidify a better-than-feared quarter. Treasury yields extending a recent slide and the U.S. Dollar Index snapped a two-week losing streak, while crude oil prices gained ground as heightened geopolitical concerns overshadowed another larger-than-expected rise in oil inventories. As such, financials were the worst performers and real estate issues posted a solid advance.

Results from the retail sector will continue to put the finishing touches on earnings season next week, while the economic calendar will remain focused on the housing market, courtesy of the releases of existing and new home sales. The Fed will also garner attention as the Fed will release the minutes from its most recent monetary policy meeting, and Chairman Jerome Powell is scheduled to speak Monday night.

Market Insights 5/16/2019

U.S. equities finished higher for a third-straight day, continuing to pare the large losses seen last week and Monday, with trade concerns continuing to ease and following some upbeat earnings and economic data. .

Treasury yields were modestly higher, as was the U.S. dollar, while crude oil prices gained ground and gold was lower.

The Markets…

The Dow Jones Industrial Average rose 215 points (0.8%) to 25,863

The S&P 500 Index increased 25 points (0.9%) to 2,876

The Nasdaq Composite gained 76 points (1.0%) to 7,898

In moderate volume, 759 million shares were traded on the NYSE and 2.1 billion shares changed hands on the Nasdaq

WTI crude oil gained $0.85 to $62.87 per barrel and wholesale gasoline was $0.05 higher at $2.06 per gallon

The Bloomberg gold spot price decreased $9.48 to $1,287.01 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.3% higher at 97.86

Housing construction activity stronger than expected, jobless claims drop

Housing starts for April rose 5.7% month-over-month to an annual pace of 1,235,000 units, above the Bloomberg forecast of 1,209,000 units. March starts were revised higher to an annual pace of 1,168,000. Building permits, one of the leading indicators tracked by the Conference Board as it is a gauge of future construction, increased 0.6% m/m to an annual rate of 1,296,000, versus expectations of a 1,289,000 pace, and compared to March’s upwardly-revised 1,288,000 rate. Starts rose for both single-unit and multi-unit structures, while a jump in multi-unit structures boosted permits, overshadowing a decline in single-unit authorizations.

Weekly initial jobless claims fell 16,000 to 212,000, compared to estimates of 220,000, with the prior week’s figure being unrevised at 228,000. The four-week moving average increased by 4,750 to 225,000, while continuing claims dropped by 28,000 to 1,660,000, south of estimates of 1,673,000.

Treasuries were lower, as the yields on the 2-year and 10-year notes increased 2 bps to 2.18% and 2.39%, respectively, and the 30-year bond rate gained 1 bp to 2.84%. Bond yields have recovered from a recent drop and the U.S. Dollar Index was higher, while the stock markets continue to chip away at Monday’s selloff.

The week’s economic calendar will close out tomorrow on the light side, with the Index of Leading Economic Indicators (LEI) forecasted to have increased 0.2% m/m during May following the 0.4% m/m rise in March, as well as the preliminary University of Michigan Consumer Sentiment Index for May expected to post a level of 97.5, a slight uptick from the 97.2 registered in April.

Europe higher, Asia mixed as trade concerns continue to cool

European equities finished higher, with worries of the escalation of the trade war between the U.S. and China, which led to last week’s and Monday’s global market selloffs, continuing to ease a bit as talks are supposed to resume later this month. Also, trade uneasiness was also cooled by reports that the U.S. in planning on delaying imposing tariffs on auto imports. The earnings front out of the U.S. appeared to set a positive tone across the pond and seemed to carry over to this side. The euro was lower versus the U.S. dollar and the British pound declined amid resurfacing Brexit uncertainty. Bond yields in the region were mostly lower.

Stocks in Asia finished mixed with the global markets continuing to be focused on escalated trade tensions between the U.S and China, though concerns have eased a bit as reports suggest that the U.S. could postpone tariffs on auto imports and trade talks are expected to resume at the end of the month. Additionally, the markets are digesting the latest developments, with U.S. President Donald Trump signing an executive order giving the Commerce Department authority to ban telecommunications network gear and services from foreign adversaries.

Stocks in Japan declined, with the yen choppy after yesterday’s rise, and South Korean equities fell. However, shares in mainland China rose and those traded in Hong Kong finished little changed. Australian securities advanced, with the nation posting stronger-than-expected employment growth in April, and markets in India moved higher, despite likely caution ahead of next week’s national election results and as the nation’s exports ticked higher last month.

Random Thoughts

Fundamentals tell you “what”, but technicals tell you “when” and “how far”.

The recent selloff in stock prices was triggered by the elevation of trade tensions between the U.S. and China, which caused the S&P 500 to test an important technical support level.

Other benchmarks also challenged, but did not break, critical support levels. Should these levels continue to hold, expectations are that the market does not believe that the trade discord will be protracted or widened, nor lead to a worldwide economic slowdown or, worse yet, a global recession.

Even though we forecast a slight softening of U.S. and global economic growth over the next two years, we do not foresee recession, which we think would allow equity prices to regain their upward trajectory

Market Insights 5/15/2019

After beginning the day in negative territory amid some disappointing global economic data, U.S. equities finished higher following reports that President Trump plans to delay imposing tariffs on auto imports for up to six months.

Domestic retail sales came well short of expectations and industrial production surprisingly fell. Treasury yields were lower on the data and gold lost ground in choppy trading, while crude oil prices were modestly higher and the U.S. dollar was little changed.

The Markets…

The Dow Jones Industrial Average rose 116 points (0.5%) to 25,648

The S&P 500 Index increased 17 points (0.6%) to 2,851

The Nasdaq Composite gained 88 points (1.1%) to 7,822

In moderate volume, 724 million shares were traded on the NYSE and 1.9 billion shares changed hands on the Nasdaq

WTI crude oil added $0.24 to $62.02 per barrel and wholesale gasoline was $0.03 higher at $2.01 per gallon

The Bloomberg gold spot price decreased $0.67 to $1,296.25 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—was nearly unchanged at 97.57

Retail sales miss, while homebuilder sentiment tops forecasts

Advance retail sales for April declined 0.2% month-over-month, versus the Bloomberg forecast of a 0.2% gain, but March’s solid gain was revised higher to a 1.7% increase. Last month’s sales ex-autos ticked 0.1% higher m/m, compared to expectations of a 0.7% gain and March’s upwardly-revised 1.3% rise. Sales ex-autos and gas decreased 0.2%, compared to estimates of a 0.3% gain, and March’s favorably-adjusted 1.1% increase. The control group, a figure used to calculate GDP, was flat, versus projections of a 0.3% rise, and compared to March’s upwardly-revised 1.1% gain. Retail sales have declined for the second month out of three, weighed down by solid declines in sales of autos, electronics and appliances, as well as building materials.

The National Association of Home Builders (NAHB) Housing Market Index showed homebuilder sentiment in May improved to 66 from April’s unrevised 63 level, versus estimates of 64, with a level of 50 separating good and poor conditions. The NAHB said, “Builders are catching up after a wet winter and many characterize sales as solid, driven by improved demand and ongoing low overall supply. However, affordability challenges persist.”

Treasuries were higher, as the yields on the 2-year and 10-year notes, along with the 30-year bond declined 3 bps to 2.16%, 2.38% and 2.82%. Bond yields added to Monday’s drop and the U.S. Dollar Index saw a modest increase, while the stock markets modestly added to yesterday’s solid rebound from Monday’s selloff. Volatility has increased amid escalated trade tensions and uncertainty after the U.S. on Friday increased tariffs on Chinese goods and U.S.-China talks ended without a deal last week, while China retaliated with increased levies on U.S. goods. However, concerns appear to be easing a bit after reports suggested the White House is planning to delay tariffs on auto imports.

The MBA Mortgage Application Index dipped 0.6% last week, following the prior week’s 2.7% increase that snapped a string of four-straight weekly decreases. The fall came as a 0.5% decline in the Refinance Index was met with a 0.6% drop for the Purchase Index. The average 30-year mortgage rate moved 1 basis point lower to 4.40%.

Europe and Asia mostly higher on trade headlines

European equities reversed course to finish higher, with Eurozone Q1 GDP growth accelerating quarter-over-quarter and German output returning to growth for the first time since Q2 of 2018. The auto sector turned higher after headlines suggested the While House may be planning to delay imposing tariffs on auto imports. The markets remained on edge amid the heightened U.S.-China trade tensions, while economic data out of China missed forecasts, preceding today’s softer-than-expected U.S. retail sales and industrial production reports.

The euro and the British pound lost ground versus the U.S. dollar, while bond yields in the region were mostly lower.

Stocks in Asia finished mostly to the upside, with the U.S. and European markets recovering yesterday from Monday’s selloff as U.S. President Donald Trump said he expected a successful meeting with Chinese President Xi at the late-June G-20 in Japan, which appeared to ease exacerbated trade war concerns. The relatively cooled trade worries helped overshadow some disappointing April Chinese economic data that showed fixed asset investment, industrial production and retail sales all missed forecasts, which seemed to increase expectations of further stimulus measures.

Stocks in mainland China and Hong Kong advanced, and those traded in Japan moved higher, with the yen choppy. Australian equities gained ground, with the nation’s consumer confidence improving in May, and South Korean listings traded to the upside. However, markets in India declined amid some likely cautious trading ahead of next week’s nation election results.

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.

Market Insights 5/13/2019

U.S. equities finished solidly in the red, near the lows of the day and adding to last week’s tumble that marked the largest fall of 2019, as trade tensions between U.S. and China intensified with China retaliating with tariffs on U.S. goods after Friday’s increased duties on Chinese goods by the U.S.

Treasury yields were lower and the U.S. dollar was nearly unchanged amid a dormant economic calendar, while gold jumped and crude oil prices reversed course to trade lower despite heightened geopolitical worries.

The Markets…

The Dow Jones Industrial Average tumbled 617 points (2.4%) to 25,325

The S&P 500 Index fell 70 points (2.4%) to 2,812

The Nasdaq Composite plunged 270 points (3.4%) to 7,647

In heavy volume, 931 million shares were traded on the NYSE and 2.4 billion shares changed hands on the Nasdaq

WTI crude oil lost $0.62 to $61.04 per barrel and wholesale gasoline was $0.03 lower at $1.96 per gallon

The Bloomberg gold spot price increased $13.44 to $1,299.49 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—was unchanged at 97.33

Treasury yields fall as economic calendar is quiet and trade concerns fester

Treasuries rallied, as the yield on the 2-year note fell 7 basis points to 2.17%, the yield on the 10-year note dropped 5 bps to 2.40%, and the 30-year bond rate decreased 4 bps to 2.83%. The stock markets extended last week’s drop, which was the largest of 2019 for the S&P 500, amid escalated trade tensions and uncertainty after the U.S. on Friday increased tariffs on Chinese goods and U.S.-China talks ended without a deal.

The markets looked for signs of when the next round of talks will begin, while digesting the retaliatory measures announced by China, which plans to increase tariffs on U.S. goods.

Europe and Asia lower as trade uneasiness festers

European equities finished lower, as the global markets extended last week’s drop that came amid heightened trade tensions between the U.S. and China after talks ended on Friday without a deal and the U.S. increased tariffs on Chinese goods. The markets added to today’s drop after China announced plans to retaliate with tariffs on U.S. goods after the Asian markets closed on Monday.

The euro fell and the British pound was little changed versus the U.S. dollar, and bond yields in the region were mixed. The economic calendar was subdued, but a read on French industry sentiment slipped surprisingly for April.

Stocks in Asia finished lower, adding to last week’s drop, as trade worries and uncertainty regarding the U.S. and China continued to hamper the markets after last week’s talks ended without a deal and as the U.S. increased tariffs on Chinese goods. The markets awaited any retaliatory measures from China, which had not been announced during the Asian trading session.

Chinese equities fell, and stocks in Japan moved lower, with the yen gaining ground. Markets in South Korea and Australia fell, as did securities listed in India, with the latter mulling a report that showed the nation’s industrial production unexpectedly declined in March. The Hong Kong markets were closed for a holiday.

The U.S. equity markets have had a lot to digest

After declining nearly 20% on a closing basis through 12/24/18, the S&P 500 set a new all-time high on April 23, 2019, thus concluding the deep correction that started on September 20.

It then reached an even loftier peak on the final day of the month. Yet in perfect timing with the start of the seasonally weak “Sell in May” period, stocks began to digest these gains.

The first trigger was when Fed Chair Jerome Powell threw cold water on investors’ belief that the FOMC would soon begin a new rate-cutting cycle. Then the water torture continued when the ante was upped ahead of the trade discussion between the U.S. and China. As a result, the S&P 500 slipped a shade more than 2% through May 10, accompanied by 10 of 11 sectors and nearly 80% of the 146 sub-industries within the S&P Composite 1500. Now only 53% of these sub-industries are trading above their 50-day (10-week) moving averages vs. 85% less than a month ago.

Despite Friday’s bounce, investors wonder if the markets have further to fall. Likely so, as the percentage of sub-industries trading above their 10-week averages has typically fallen below 33% before beginning to indicate that the earlier excesses have been worked off. In addition, a first-order Fibonacci retrenchment (23.6%) of the recovery since Christmas Eve would imply a setback to around 2805 on the S&P 500, while a 38.2% retrenchment points to a near-8% pullback.

Yet since we see a trade accord being reached in the not-too-distant future, we don’t expect the market to endure more than a short-lived spate of indigestion.

Market Insights 5/10/2019

U.S. equities bounced off the lows of the day that came amid angst over the U.S. keeping its promise to institute levies on Chinese goods to finish higher, as investors appeared hopeful for a breakthrough on a deal with talks with the Asian nation continuing today.

Treasury yields and the U.S. dollar finished nearly flat, while crude oil prices were mixed and gold was higher.

The Markets…

The Dow Jones Industrial Average rose 114 points (0.4%) to 25,942

The S&P 500 Index was up 11 points (0.4%) to 2,882

The Nasdaq Composite added 6 points (0.1%) to 7,917

In moderate volume, 862 million shares were traded on the NYSE and 2.3 billion shares changed hands on the Nasdaq

WTI crude oil inched $0.04 lower to $61.66 per barrel and wholesale gasoline was up $0.01 at $1.99 per gallon

The Bloomberg gold spot price increased $2.40 to $1,286.48 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—was unchanged at 97.38

Markets were solidly lower for the week, as the DJIA fell 2.1%, the S&P 500 Index declined 2.2% and the Nasdaq Composite decreased 3.0%

Consumer price inflation mostly cooler than expected

The Consumer Price Index (CPI) rose 0.3% month-over-month in April, below the Bloomberg estimate calling for it to match March’s unrevised 0.4% rise. The core rate, which strips out food and energy, was 0.1% higher m/m, versus expectations of a 0.2% increase and in line with March’s unrevised gain. Y/Y, prices were 2.0% higher for the headline rate, south of forecasts of a 2.1% gain and compared to March’s unadjusted 1.9% rise. The core rate was up 2.1% y/y, matching projections and compared to March’s unadjusted 2.0% gain.

Treasuries were nearly unchanged, as the yield on the 2-year note ticked 1 basis point lower to 2.25%, while the yields on the 10-year note and the 30-year bond were flat at 2.46% and 2.88%, respectively.

Europe mostly higher on data and despite increased tariffs on Chinese goods, Asia lower

European equities finished out the week mostly higher amid some upbeat economic data, while the markets pared some solid losses seen this week leading up to today’s announcement that the U.S. will go ahead of with increased tariffs on Chinese goods. Talks between the U.S. and China are continuing today and the action suggests that hope remains that some sort of progress will be made to help limit the sting from the increased levies on Chinese goods.

The economic calendar in the region seemed to lend some support, with U.K. Q1 GDP growth accelerating to the fastest pace of growth (1.8% y/y) since 2017, likely due to some maneuvering ahead of Brexit, and U.K. manufacturing/industrial production in March growing more than forecasted. Moreover, German exports unexpectedly rose in March. The euro and British pound rose versus the U.S. dollar, and bond yields in the region were mostly higher.

Stocks in Asia finished mixed to conclude a week that saw a broad-based slide amid increased trade concerns as the U.S. went ahead with its threat to increase tariffs on Chinese goods as talks continue today in Washington.

Chinese stocks finished higher, with those traded on the mainland rallying and markets in Hong Kong posting modest gains. The moves came as the markets fell sharply leading up to today’s tariff action and as talks continue today.

Stocks in Japan’s declined, with the yen choppy following March data that showed the nation’s household spending was stronger than expected though wage figures fell more than anticipated. Equities in South Korea and Australia both gained ground, while shares in India moved to the downside.

Stocks fall as trade deal threatened

The global markets fell on the week, with U.S. stocks posting the biggest weekly losses of 2019, as optimism of a trade deal between the U.S. and China, which had been elevated, was dampened by the U.S. increasing tariffs on Chinese goods on Friday, with President Donald Trump saying China “broke the deal.” The two sides are continuing talks in Washington amid the escalated tensions.

The economic calendar was a bit lighter than usual and was overshadowed by the trade concerns, but data showed inflation remained subdued, the trade deficit widened slightly and demand for labor rebounded back to near record highs. Earnings season also decelerated and headed down the home stretch. Of the 450 S&P 500 companies that have reported thus far, about 55% have topped revenue forecasts and nearly 76% have bested earnings estimates, per data compiled by Bloomberg. The U.S. dollar dipped for a second-straight week, crude oil prices slipped for a third-consecutive week, and Treasury yields fell noticeably.

Trade uncertainty jumped back into the headlines with threats of additional tariffs coming alongside worsening prospects of a China/U.S. deal. Earnings season was mostly better than low expectations, but still only roughly flat in year/year growth.

The economy continues to look fairly solid, although there are some cracks under the surface that raise some concerns. It’s not just the United States that suffers from the trade war; however lower correlations among major global asset classes bolster the case for diversification.

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.

Market Insights 5/8/2019

In what looked to be a modest rebound following yesterday’s sharp declines that came courtesy of increased U.S.-China trade tensions, U.S. equities lost steam in the final minutes to finish mixed.

Treasury yields finished higher amid a light economic calendar that showed that mortgage applications broke a four-week losing streak.

The U.S. dollar was nearly unchanged, gold was lower and crude oil prices were higher.

The Markets…

The Dow Jones Industrial Average rose 2 points to 25,967

The S&P 500 Index lost 5 points (0.2%) to 2,879

The Nasdaq Composite decreased 20 points (0.3%) to 7,943

In moderate volume, 814 million shares were traded on the NYSE and 2.1 billion shares changed hands on the Nasdaq

WTI crude oil gained $0.72 to $62.12 per barrel and wholesale gasoline was up $0.03 at $1.98 per gallon

The Bloomberg gold spot price decreased $3.48 to $1,280.95 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—was unchanged at 97.62

Mortgage applications snap string of weekly declines

The MBA Mortgage Application Index rose 2.7% last week, following the prior week’s 4.3% decline. This snapped a string of four-straight weekly decreases as a 0.8% rise in the Refinance Index was met with a 4.2% gain for the Purchase Index. The average 30-year mortgage rate dipped 1 basis point to 4.41%.

Treasuries were lower, as the yield on the 2-year note rose 2 bps to 2.30%, while the yields on the 10-year note and the 30-year bond increased 3 bps to 2.48% and 2.89%, respectively.

The first look at the April inflation landscape will come tomorrow, courtesy of the Producer Price Index (PPI), with economists projecting a 0.3% month-over-month m/m increase, while the core rate, which excludes food and energy, is estimated to have risen 0.2% m/m. Weekly initial jobless claims are also slated for release, forecasted to have declined 10,000 to 220,000, and the trade balance will round out the docket, anticipated to show the deficit widened slightly during March to $50.1 billion from the $49.4 billion registered in February.

Europe mixed amid trade worries and German data, Asia lower after yesterday’s U.S. slide

European equities finished mixed, with the global markets remaining hampered by resurfaced U.S.-China trade worries as talks are set to resume this week and the U.S. has threatened to increase tariffs on Chinese goods by Friday. German earnings and economic data was in focus and mostly positive, with the nation posting an unexpected month-over-month rise in industrial production.

The euro and the British pound lost ground versus the U.S. dollar, while bond yields in the region were mostly lower.

Stocks in Asia finished broadly lower, with the global markets falling yesterday amid escalated trade tensions as the U.S. and China are set to resume talks this week amid the backdrop of the former threatening to increase tariffs on the latter’s goods on Friday.

Mainland Chinese securities and those traded in Hong Kong were lower, with the markets also digesting a mixed Chinese trade report for April, which showed exports were below expectations but imports came in stronger than anticipated. Stocks in Japan fell sharply, with the yen gaining ground, while markets in Australia, South Korea and India all traded to the downside.