Dow dropped 251 (not far from the lows), decliners over advancers 3-2 but NAZ was off a modest 20. The MLP index was steady in the 267s & the REIT index continued at 341. Junk bond funds edged lower & Treasuries rose slightly, taking the yield on the 10 year Treasury down to 2.82%. Oil remained weak, dropping 1+ to 67, & gold pulled back 2 to 1304, but holding above the support level of 1300.
AMJ (Alerian MLP index tracking fund)
![Live 24 hours gold chart [Kitco Inc.]](http://www.kitco.com/images/live/gold.gif?0.07936336971961566)
Oil production in the US could soar to 11M barrels per day bpd by the end of 2018, especially if the Trump administration puts the necessary infrastructure – pipelines, refineries, export facilities – in place, according to Sec of the Interior Ryan Zinke. “There’s no reason why we can’t produce over 11 barrels a day,” he said. “If we have the infrastructure in place, my God, we could be at 14 million barrels a day.” US crude output, which has shown no sign of slowing, has surged more than 27% in the past 2 years to 10.73M bpd, inching closer to Russia's 11M bpd. Russia is the top oil producer in the world, followed by Saudi Arabia & the US. Baker Hughes latest rig count showed US energy companies added 13 new oil rigs to production last week, increasing total drilling activity to its highest level since Mar 2015. “That’s a lot of leverage overseas with Russia [and] Iran,” Zinke said. “This is unheard of in the history of this country.”
Canada will retaliate against new US tariffs by imposing its own trade barriers on US steel, aluminum & other products, Canadian Foreign Minister Chrystia Freeland said. Freeland said Canada plans to slap $-for-$ tariffs on the US. The Nafta partner's proposed import taxes would also cover whiskey, orange juice & other food products alongside the steel & aluminum tariffs. The retaliatory measures will cover CA$16.6B in imports, Freeland added. The products being targeted will be subject to tariffs between 10% & 25%. Canadian Prime Minister Justin Trudeau said that the tariffs announced today are an affront to the security partnership between the US & Canada. Ross said the tariffs will take effect at midnight tonight, when previously set exemptions for Canada, Mexico and the EU are set to expire. The tariffs are "totally unacceptable," Trudeau said, though he noted that Canada will continue to negotiate with the US. Trudeau warned that the Trump administration's soon-to-be-applied tariffs, of 25% on steel imports & 10% on aluminum imports, will harm both countries' economies. Canada took umbrage with the US finding, outlined in a proclamation from Pres Trump, that "steel mill articles are being imported into the United States in such quantities and under such circumstances as to threaten to impair the national security of the United States." Freeland said: "It is entirely inappropriate to view any trade with Canada as a threat to the United States' national security." The EU condemned the US trade maneuver in similar tones. Jean-Claude Juncker, pres of the European Commission, said the EU has no choice but to introduce countermeasures. Mexico, too, said it would impose tariffs in response to US actions.
Canada announces retaliatory tariffs on steel and aluminum
The European Commission (EC) has angrily reacted to news that the US will impose steel & aluminum tariffs on Canada, Mexico & the EU. Commerce Sec Wilbur Ross announced that tariffs of 25% on steel imports & 10% on aluminum imports will take effect from midnight. The EC said: "The EU believes these unilateral U.S. tariffs are unjustified and at odds with World Trade Organization rules. This is protectionism, pure and simple." EC Pres Jean-Claude Juncker said the EU was being hurt as much as the US by overcapacity in the steel sector. He added that the US was "playing into the hands of those responsible for the problem" & that the EU now had no choice but to proceed with legal challenge via the World Trade Organization (WTO). "We will defend the Union's interests, in full compliance with international trade law," said Juncker. The UK added that it was "deeply disappointed" by the US decision. "The U.K. and other European Union countries are close allies of the U.S. and should be permanently and fully exempted from the American measures on steel and aluminum," a UK gov spokesperson said. Prior to the announcement, German Chancellor Angela Merkel said the tariffs would be incompatible with WTO rules & that Europe's response must be "smart and determined." French Finance Minister Bruno Le Maire also said that Europe would take "all necessary measures" to respond. The EU had previously said it would impose its own tariffs on US products such as motorcycles & jeans. German Finance Minister Olaf Scholz said that the EU's response to the tariffs must be "clear, strong, and smart." When asked if there were any signs that the trade dispute could be resolved, Scholz added: "No, there are no such signs."
'Protectionism, pure and simple:' Europe promises WTO action over US tariffs
Stocks sank in the first hour & remained in the dumps for the rest of the trading session. This has been a tough year for stocks after a substantial post election rally. With new tariffs & retaliation coming, the prospects for stocks are gloomy. The Dow is only about 400 above the important 24K support level & that could be tested soon. The Dow was up about 250 this month & that was earned by May 4. Since then, no net advance.
Dow Jones Industrials
AMJ (Alerian MLP index tracking fund)
Fewer Americans signed contracts to buy homes in
Apr, reflecting the dearth of properties being listed for sale right now. The National Association of
Realtors said that its pending home sales index fell 1.3% in Apr to 106.4, after rising for 2 consecutive months. The
index has drifted downward 2.1% from a year ago as the housing
shortage has grown more intense. The association reported previously
that sales listings in Apr had declined 6.3% over the past 12
months. A relatively robust job market has led
more Americans look for homes. But the housing shortage & rising
mortgage rates over the past year are putting home ownership out of
reach for an increasingly large number of people. Home
prices are rising at more than double the gains in average hourly
earnings, meaning that many first-time buyers are being forced into
lower down payments to afford a home. The S&P CoreLogic Case-Shiller
20-city home price index released this week climbed 6.8% in
Mar from a year earlier. Pending sales over the past year have fallen in
the Northeast, Midwest & West, a sign of those cost pressures. But
pending sales have risen 2.7% in the South where home prices are
generally lower. New construction has yet to
alleviate the supply shortage. Builders have said they, too, face price
pressures from rising land values, a dearth of construction workers &
higher costs for building materials, which could become more expensive
given tariffs announced today on aluminum & steel. The EU immediately said
that it would impose countermeasures on trade & Mexico opened its
defense with its own tariffs minutes after the announcement.
US pending home sales fell 1.3 percent in April
Oil production in the US could soar to 11M barrels per day bpd by the end of 2018, especially if the Trump administration puts the necessary infrastructure – pipelines, refineries, export facilities – in place, according to Sec of the Interior Ryan Zinke. “There’s no reason why we can’t produce over 11 barrels a day,” he said. “If we have the infrastructure in place, my God, we could be at 14 million barrels a day.” US crude output, which has shown no sign of slowing, has surged more than 27% in the past 2 years to 10.73M bpd, inching closer to Russia's 11M bpd. Russia is the top oil producer in the world, followed by Saudi Arabia & the US. Baker Hughes latest rig count showed US energy companies added 13 new oil rigs to production last week, increasing total drilling activity to its highest level since Mar 2015. “That’s a lot of leverage overseas with Russia [and] Iran,” Zinke said. “This is unheard of in the history of this country.”
US oil production could hit 11M barrels per day this year
Chinese factory activity grew at its fastest rate
in 8 months on stronger demand, a survey showed, a
positive sign for the world's #2 economy despite trade tensions with
the US. The official purchasing managers'
index rose to 51.9 in May from 51.4 the previous month (readings above
50 indicate expansion, while lower numbers indicate contraction on the 100-point scale). Production, new export
orders & overall new orders all increased from the previous month,
indicating an uptick in demand, the China Federation of Logistics &
Purchasing's survey found. "The pace of
manufacturing expansion has accelerated and development momentum has
been further strengthened," said the
National Bureau of Statistics. The latest figures show China's outsized
export-manufacturing sector remains resilient despite continued tensions
with the US over the trading relationship between the 2 economies. Tensions had been ebbing
until earlier this week, when Pres Trump's administration
renewed its threat to slap $50B worth of tariffs on Chinese goods & said it would also limit US exports of high-tech goods to China.
It's part of US efforts to contain China's state-directed efforts to
transform itself into a tech superpower. But
despite DC efforts, activity expanded in May, according to the
survey's high-tech manufacturing sub-index, which rose in May to 54.8,
up 1 point from the previous month. The tariff
threat came ahead of Commerce Dept Sec Wilbur Ross's
visit to Beijing on Sat for further negotiations on economic &
trade issues. Activity in China's increasingly
important services sector also expanded. The group's non-manufacturing
PMI rose to 54.9 for the month from 54.8 previously. China's
services industry is playing a bigger role as communist leaders upgrade
economic growth, shifting it from a worn-out model based on wasteful
trade & investment to one focused on domestic spending.
China factory activity rises to 8-month high in upbeat sign
Canada will retaliate against new US tariffs by imposing its own trade barriers on US steel, aluminum & other products, Canadian Foreign Minister Chrystia Freeland said. Freeland said Canada plans to slap $-for-$ tariffs on the US. The Nafta partner's proposed import taxes would also cover whiskey, orange juice & other food products alongside the steel & aluminum tariffs. The retaliatory measures will cover CA$16.6B in imports, Freeland added. The products being targeted will be subject to tariffs between 10% & 25%. Canadian Prime Minister Justin Trudeau said that the tariffs announced today are an affront to the security partnership between the US & Canada. Ross said the tariffs will take effect at midnight tonight, when previously set exemptions for Canada, Mexico and the EU are set to expire. The tariffs are "totally unacceptable," Trudeau said, though he noted that Canada will continue to negotiate with the US. Trudeau warned that the Trump administration's soon-to-be-applied tariffs, of 25% on steel imports & 10% on aluminum imports, will harm both countries' economies. Canada took umbrage with the US finding, outlined in a proclamation from Pres Trump, that "steel mill articles are being imported into the United States in such quantities and under such circumstances as to threaten to impair the national security of the United States." Freeland said: "It is entirely inappropriate to view any trade with Canada as a threat to the United States' national security." The EU condemned the US trade maneuver in similar tones. Jean-Claude Juncker, pres of the European Commission, said the EU has no choice but to introduce countermeasures. Mexico, too, said it would impose tariffs in response to US actions.
Canada announces retaliatory tariffs on steel and aluminum
The European Commission (EC) has angrily reacted to news that the US will impose steel & aluminum tariffs on Canada, Mexico & the EU. Commerce Sec Wilbur Ross announced that tariffs of 25% on steel imports & 10% on aluminum imports will take effect from midnight. The EC said: "The EU believes these unilateral U.S. tariffs are unjustified and at odds with World Trade Organization rules. This is protectionism, pure and simple." EC Pres Jean-Claude Juncker said the EU was being hurt as much as the US by overcapacity in the steel sector. He added that the US was "playing into the hands of those responsible for the problem" & that the EU now had no choice but to proceed with legal challenge via the World Trade Organization (WTO). "We will defend the Union's interests, in full compliance with international trade law," said Juncker. The UK added that it was "deeply disappointed" by the US decision. "The U.K. and other European Union countries are close allies of the U.S. and should be permanently and fully exempted from the American measures on steel and aluminum," a UK gov spokesperson said. Prior to the announcement, German Chancellor Angela Merkel said the tariffs would be incompatible with WTO rules & that Europe's response must be "smart and determined." French Finance Minister Bruno Le Maire also said that Europe would take "all necessary measures" to respond. The EU had previously said it would impose its own tariffs on US products such as motorcycles & jeans. German Finance Minister Olaf Scholz said that the EU's response to the tariffs must be "clear, strong, and smart." When asked if there were any signs that the trade dispute could be resolved, Scholz added: "No, there are no such signs."
'Protectionism, pure and simple:' Europe promises WTO action over US tariffs
New applications for US unemployment benefits
fell more than expected last week, but claims for several states were estimated. Initial
claims for state unemployment benefits dropped 13K to a seasonally
adjusted 221K for the latest week, the Labor Dept said. The forecast called for claims falling to 228K. The Labor Dept said claims for numerous states were estimated last
week because of the Memorial Day holiday. The
labor market is viewed as being close to or at full employment. The
jobless rate is near a 17-year low of 3.9%, within striking
distance of the Federal Reserve's forecast of 3.8% by the end of
this year. The 4-week moving average of initial claims,
viewed as a better measure of labor market trends as it irons out
week-to-week volatility, rose 2K to 222K last week. The
claims report has no bearing on May's employment report, which is
scheduled for release tomorrow which may show nonfarm payrolls increased 188K jobs after
rising by 164K jobs in Apr. Job growth is slowing, with employers struggling to find qualified workers. The
Federal Reserve's latest Beige Book report of anecdotal information on
business activity collected from contacts nationwide showed labor market
conditions remained tight across the country in late Apr & early
May. The Fed said contacts continued to report
difficulty filling positions across skill levels. There were notable
shortages of truck drivers, sales personnel, carpenters, electricians,
painters & information technology professionals. The
claims report also showed the number of people receiving benefits after
an initial week of aid fell 16K to 1.72M & the 4-week moving average of continuing claims
dropped 8K to 1.74K, the lowest level since 1973.
US weekly jobless claims fall more than expected
Stocks sank in the first hour & remained in the dumps for the rest of the trading session. This has been a tough year for stocks after a substantial post election rally. With new tariffs & retaliation coming, the prospects for stocks are gloomy. The Dow is only about 400 above the important 24K support level & that could be tested soon. The Dow was up about 250 this month & that was earned by May 4. Since then, no net advance.
Dow Jones Industrials
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