Dow fell 50, advancers over decliners 4-3 & NAZ edged up 4. The MLP index was fractionally higher to 270 & the REIT index gained 3+ to the 331s. Junk bond funds were little changed & Treasuries fluctuated. Oil went higher in the 72s & gold added 1 to 1291.
AMJ (Alerian MLP Index tracking fund)
Stocks higher as trade concerns ease
China will dramatically reduce its tariffs on imported autos to 15% from 25% & will also cut its import tariff on auto parts to 6% from 8-25%, the Chinese gov said. The reduction will be effective Jul 1. The announcement comes as high-level trade negotiations are ongoing between the US & China, in order to avert a trade war. The auto sector has been an important focus of the talks. China's Ministry of Finance said that the reduction of tariffs was an “important measure in further opening up” the Chinese economy. In Apr, China announced plans to allow full foreign ownership of automakers in 5 years, ending restrictions that has contributed to strained relations with its trading partners. Concerns of a trade war between the US & China have underpinned markets for weeks, but on the weekend fears were alleviated after Treasury Sec Steve Mnuchin said the trade war was “on hold” & US markets reacted by rallying on yesterday.
The EU expressed doubt that Pres Trump will accept an offer of trade talks & other incentives to permanently exempt the bloc from punishing tariffs on steel & aluminum exports next week. In Mar, Trump imposed tariffs of 25% on steel imports & 10% on imported aluminum, but granted the 28 EU countries an exemption until Jun 1. He also temporarily excluded big steel producers Canada & Mexico, provided they agree to renegotiate a North American trade deal to his satisfaction. Should a permanent exemption be granted, the EU stands ready to deepen trans-Atlantic energy cooperation, notably on liquefied natural gas, improve reciprocal market access for industrial products & work together to reform World Trade Organization rules. "Is this going to be enough? I'm not sure frankly," Trade Commissioner Cecilia Malmstrom said after discussing the tariffs with EU ministers. "There have been signals from the U.S. that the exemptions will not be prolonged. So either they will be imposed on us the first of June, or there will be other sorts of limiting measures," Malmstrom added. She did not elaborate on what those measures might be. Malmstrom pointed out that she & Secretary of Commerce Wilbur Ross speak about the problem several times a week, but she conceded that "the final decision on this will be made personally by the president." Convinced that the US move breaks global trade rules, the EU has drawn up a list of "rebalancing" duties worth some €2.8B ($3.4B) to impose on US products if it is not permanently exempt. It has vowed not to negotiate under threat. "The moment the threat is lifted, we are ready to talk," French Foreign Minister Jean-Yves Le Drian said. The EU, the world's biggest trading bloc, rejects Trump's argument that the tariffs are needed to protect national security. Most EU countries are US partners in NATO. "We think that they are not legitimate, and they go against the WTO," Malmstrom said. German Economy Minister Peter Altmaier said today's meeting sent "a signal of the determination and unity of the EU: we want to defend and strengthen free, fair & rules-based trade in the WTO framework." "But we are also holding out our hand for dialogue. It is now up the U.S. to take that hand and avoid an escalation that would damage everyone. We are offering the U.S. talks with us on various trade issues, on mutual market access for industrial goods or on energy questions."
US luxury home builder Toll Brothers (TOL) Q2 profit missed estimates, hurt by higher costs due to rising prices for building materials and shortages of land & skilled workers. Costs rose 20.5% to $1.29B & adjusted gross margins slipped to 22.5% from 24.3% a year earlier. That number narrowly missed the homebuilder's forecast of 22.8%. "Home ownership and household formation rates are increasing, while supply remains constrained," CEO Robert Toll said. The housing market is yet to fully recover from the long-term damage of the subprime crash a decade ago. Many homebuilders are also fighting rising costs & labor shortages even though demand is picking up. Orders, an indication of future revenue for homebuilders, rose 6.2% to 2666 homes. The company said the average price of homes rose to $847K from $832K a year earlier, while the number of homes sold rose to 1886 from 1638 in the qtr. The company raised its forecast for the number of homes it expects to sell in fiscal 2018 to 8-8.5K units, from 7.8-8.6 units. TOL also raised the lower end of its full-year average price forecast to $830K from $820K but kept the higher end unchanged at $860K. EPS was 72¢ versus 73¢ a year earlier, with the company recording an inventory charge of $13.8M. Analysts had expected EPS of 76¢ & revenue of $1.58B. The stock dropped 3.68 (8%).
If you would like to learn more about TOL, click on this link:
club.ino.com/trend/analysis/stock/TOL?a_aid=CD3289&a_bid=6ae5b6f7
Toll Brothers' profit misses estimates due to higher costs
Stocks were not able to extend yesterday's advance. More is needed beyond mere words with so many issues that need to be decided on the trade front. The Dow slipped below 25K & the bulls look to be heading for the exits.
Dow Jones Industrials
AMJ (Alerian MLP Index tracking fund)
| CL=F | Crude Oil | 72.37 | +0.13 | +0.2% |
| GC=F | Gold | 1,293.10 | +2.20 | +0.2% |
The stock market's rally has extended into a 2nd session, with the major stock indices in positive territory
as fears of a trade war between the US & China continue to recede. China's
Foreign Ministry said it has "reached a consensus" with the US to
start negotiations on a deal that would remove an existing US order
banning American companies from supplying Chinese telecommunications
equipment maker ZTE. China also announced it is slashing vehicle import tariffs. Yesterday investors bid up stocks following the news that US &
Chinese officials agreed to delay tariffs that both nations had
threatened to impose against each other amid a dispute over trade terms.
The Dow surged 298 (1.2%) to 25,013, the S&P 500
jumped 20 (0.7%) to 2733 & NAZ was up
39 (0.5%) at 7394. In commodities, gold futures were lower while oil futures were higher, with US crude oil holding above $72 a barrel.
Stocks higher as trade concerns ease
China will dramatically reduce its tariffs on imported autos to 15% from 25% & will also cut its import tariff on auto parts to 6% from 8-25%, the Chinese gov said. The reduction will be effective Jul 1. The announcement comes as high-level trade negotiations are ongoing between the US & China, in order to avert a trade war. The auto sector has been an important focus of the talks. China's Ministry of Finance said that the reduction of tariffs was an “important measure in further opening up” the Chinese economy. In Apr, China announced plans to allow full foreign ownership of automakers in 5 years, ending restrictions that has contributed to strained relations with its trading partners. Concerns of a trade war between the US & China have underpinned markets for weeks, but on the weekend fears were alleviated after Treasury Sec Steve Mnuchin said the trade war was “on hold” & US markets reacted by rallying on yesterday.
Beijing cuts tariffs on cars, car parts
The EU expressed doubt that Pres Trump will accept an offer of trade talks & other incentives to permanently exempt the bloc from punishing tariffs on steel & aluminum exports next week. In Mar, Trump imposed tariffs of 25% on steel imports & 10% on imported aluminum, but granted the 28 EU countries an exemption until Jun 1. He also temporarily excluded big steel producers Canada & Mexico, provided they agree to renegotiate a North American trade deal to his satisfaction. Should a permanent exemption be granted, the EU stands ready to deepen trans-Atlantic energy cooperation, notably on liquefied natural gas, improve reciprocal market access for industrial products & work together to reform World Trade Organization rules. "Is this going to be enough? I'm not sure frankly," Trade Commissioner Cecilia Malmstrom said after discussing the tariffs with EU ministers. "There have been signals from the U.S. that the exemptions will not be prolonged. So either they will be imposed on us the first of June, or there will be other sorts of limiting measures," Malmstrom added. She did not elaborate on what those measures might be. Malmstrom pointed out that she & Secretary of Commerce Wilbur Ross speak about the problem several times a week, but she conceded that "the final decision on this will be made personally by the president." Convinced that the US move breaks global trade rules, the EU has drawn up a list of "rebalancing" duties worth some €2.8B ($3.4B) to impose on US products if it is not permanently exempt. It has vowed not to negotiate under threat. "The moment the threat is lifted, we are ready to talk," French Foreign Minister Jean-Yves Le Drian said. The EU, the world's biggest trading bloc, rejects Trump's argument that the tariffs are needed to protect national security. Most EU countries are US partners in NATO. "We think that they are not legitimate, and they go against the WTO," Malmstrom said. German Economy Minister Peter Altmaier said today's meeting sent "a signal of the determination and unity of the EU: we want to defend and strengthen free, fair & rules-based trade in the WTO framework." "But we are also holding out our hand for dialogue. It is now up the U.S. to take that hand and avoid an escalation that would damage everyone. We are offering the U.S. talks with us on various trade issues, on mutual market access for industrial goods or on energy questions."
EU braces for US to go ahead with steel and aluminum tariffs
US luxury home builder Toll Brothers (TOL) Q2 profit missed estimates, hurt by higher costs due to rising prices for building materials and shortages of land & skilled workers. Costs rose 20.5% to $1.29B & adjusted gross margins slipped to 22.5% from 24.3% a year earlier. That number narrowly missed the homebuilder's forecast of 22.8%. "Home ownership and household formation rates are increasing, while supply remains constrained," CEO Robert Toll said. The housing market is yet to fully recover from the long-term damage of the subprime crash a decade ago. Many homebuilders are also fighting rising costs & labor shortages even though demand is picking up. Orders, an indication of future revenue for homebuilders, rose 6.2% to 2666 homes. The company said the average price of homes rose to $847K from $832K a year earlier, while the number of homes sold rose to 1886 from 1638 in the qtr. The company raised its forecast for the number of homes it expects to sell in fiscal 2018 to 8-8.5K units, from 7.8-8.6 units. TOL also raised the lower end of its full-year average price forecast to $830K from $820K but kept the higher end unchanged at $860K. EPS was 72¢ versus 73¢ a year earlier, with the company recording an inventory charge of $13.8M. Analysts had expected EPS of 76¢ & revenue of $1.58B. The stock dropped 3.68 (8%).
If you would like to learn more about TOL, click on this link:
club.ino.com/trend/analysis/stock/TOL?a_aid=CD3289&a_bid=6ae5b6f7
Toll Brothers' profit misses estimates due to higher costs
Stocks were not able to extend yesterday's advance. More is needed beyond mere words with so many issues that need to be decided on the trade front. The Dow slipped below 25K & the bulls look to be heading for the exits.
Dow Jones Industrials
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