Dow dropped 287, decliners over advances a relatively mild 4-3 & NAZ fell 21. The MLP index was off 1+ to the 264s & the REIT index slid lower in the 342s. Junk bond funds were mixed & Treasuries went up, taking the yield on the 10 year Treasury down 3 basis points to 2.89%. Oil declined to 65 (more below) & gold slid back 2 to 1277.
AMJ (Alerian MLP Index tracking fund)
The real loss for stocks today was less severe than the gloomy decline implies. Tech stocks held up reasonably well & market breadth was only mildly negative. While there were only 8 gainers in the Dow, much of its decline was concentrated in 4 stocks. Boeing (BA) & Caterpillar (CAT) were off about 4% each, & DowDuPont (DD) & 3M (MMM) were each off 2+%. Of course they have a lot of business related to the higher tariffs proposed by the US, China & other allies. Trade war fears are bringing on the selling but it has been somewhat selective. As growing uncertainty about more retaliation persists, selling will be less selective & spread. On the optimistic side, the Dow finished about 130 above session lows.
Dow Jones Industrials
AMJ (Alerian MLP Index tracking fund)
US stocks may be getting slammed by the latest trade tensions, but equities in China are faring far worse. China's benchmark Shanghai
Composite Index tumbled 4% to a 2-year low on today & has fallen 7 of the past 8 trading days. The country's benchmark index is
now below 3K & down 18.3% from its recent closing high, putting it
very close to a 20% drop that would signal a bear market. By
comparison, the Dow was down triple digits today, but for the year it's little changed. Meanwhile the S&P 500
is about 3% higher for the year. Global
markets are volatile as the prospects for a trade war have
intensified. Yesterday Trump threatened to hit another $200B
worth of Chinese products with tariffs. This after he
slapped tariffs on $50B worth of goods last Fri. China
retaliated Fri & then yesterday causing more upheaval in
the global markets. Peter Navarro, a White
House trade adviser today said, “China has more to lose going
forward. China sent us $505 billion in goods last year. We sent $130
billion. They feel the numbers are on their side.” Adding
more uncertainty, China is in the midst of a regulatory push to reduce
risks in its financial system. China has been trying to reduce its debt & that has some concerned that growth will falter, making right now a
bad time for a stock market correction. The country has a history of embarking on massive
stimulus programs to spur economic growth, particularly when there have
been signs of an impending slowdown. The People's Bank of China governor
Zhou Xiaochuan said in Mar that they would move away from this old
growth model & would rely less on stimulus to boost the economy in
the future. Now Beijing is
looking at becoming more cautious about spending to reduce the risks
from a rapid build-up in debt.
China bearing the brunt of trade tensions
Global oil demand is set to stay strong in H2, an OPEC technical panel forecast this week,
suggesting the market could absorb extra production from the group. OPEC
meets on Fri to decide on output policy amid calls from major
consumers such as the US & China to cool down oil prices & therefore support the global economy by producing more crude. OPEC's
de facto leader, Saudi Arabia & non-member Russia have proposed
relaxing production cuts gradually, while OPEC members Iran, Iraq,
Venezuela & Algeria have opposed such a move. 3
sources at OPEC on a technical OPEC panel - OPEC's economic commission -
met on to review the market outlook & present it to the
ministers later in the week. "If OPEC and its allies continue to produce at May
levels then the market could be in deficit for the next six months,"
one source said. A 2nd source said: "The market outlook in the second half is strong." Some
countries including Algeria, Iran & Venezuela said at the meeting
that they still opposed an oil output increase, one source said.
OPEC sees strong oil market, possible need for more output
Oil prices fell as an escalating trade
dispute between the US & China triggered sharp sell-offs in
many global markets. Crude was also weighed down by expectations that producer cartel OPEC & key ally Russia will gradually increase output. The
US & China are threatening punitive tariffs on each
other's exports, which could include oil supplies, resulting in stock
market sell-offs. Brent crude futures were at $74.70 per barrel, down 64¢ (0.9%), from their last close. West Texas Intermediate (WTI) crude futures were at $65.28 a barrel, down 57¢ (0.9%). Oil
traders are closely watching a threat by China to react to US tariffs
by putting a 25% duty on US crude oil imports, which have been
surging since 2017 to a value of almost $1B per month. OPEC together with a
group of non-OPEC producers including Russia started withholding oil
supplies in 2017 to prop up prices. Following a
sharp increase in crude prices from their sub-$30 per barrel lows in
2016, the group on Fri will meet in Vienna, Austria, to discuss
forward policy.
Oil falls on escalating U.S.-China trade spat
The real loss for stocks today was less severe than the gloomy decline implies. Tech stocks held up reasonably well & market breadth was only mildly negative. While there were only 8 gainers in the Dow, much of its decline was concentrated in 4 stocks. Boeing (BA) & Caterpillar (CAT) were off about 4% each, & DowDuPont (DD) & 3M (MMM) were each off 2+%. Of course they have a lot of business related to the higher tariffs proposed by the US, China & other allies. Trade war fears are bringing on the selling but it has been somewhat selective. As growing uncertainty about more retaliation persists, selling will be less selective & spread. On the optimistic side, the Dow finished about 130 above session lows.
Dow Jones Industrials
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