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.