Tuesday, June 5, 2018

Markets edge higher, led by tech stocks

Dow was off 8, advancers over decliners 5-4 & NAZ jumped up 32.  The  MLP index crawled up to the 271s & the REIT index rose fractionally in the 345s.  Junk bond funds drifted lower & Treasuries inched higher.  Oil was even in the 64s & gold lost 1 to 1296.

AMJ (Alerian MLP Index tracking fund)

CL=FCrude Oil        64.40

ZG=FGold 100 oz. 1,291.00

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Pres Trump may be considering separate trade deals with NAFTA partners Canada & Mexico as relations with the pair of allies deteriorate & renegotiation discussions stall.  White House economic adviser Larry Kudlow said that the pres was contemplating a “shift in NAFTA negotiations,” to bilateral discussions.  “Countries that are different probably deserve different deals,” he said.  “His preference now, and he asked me to convey this, is to actually negotiate with Mexico and Canada separately."  Kudlow added that NAFTA discussions have “dragged on” & the pres wants to adopt the new approach in order to speed up the process.  White House Press Secretary Sarah Sanders said on Fri that the pres remained “open” to bilateral discussions.  The comments come after Mexico just issued retaliatory tariffs on US steel & agricultural products.  It will impose a 20% tariff on US pork, apple & potato imports & 20-25% levies on cheeses & bourbon.  Last week, the US imposed steel & aluminum tariffs on the EU, Mexico & Canada.  The White House said it lifted temporary exemptions granted to its NAFTA partners over the delayed negotiations.

Optimism among US CEOs, while remaining near record highs, was tempered in Q2 due to increasing uncertainty over the Trump administration's trade policies, a new survey shows.  The Business Roundtable’s CEO Economic Outlook for Q2 showed optimism among CEOs, a combined measure of expectations for sales, capital spending & hiring plans over the next 6 months, fell 7.5 points from the previous qtr. This represents the first decline the index has seen in nearly 2 years, as hiring & spending plans, as well as sales expectations, all fell.  The most recent reading of 111.1, however, is still well above the historical average of 81.2.  CEO expectations for economic growth in 2018 was 2.7%, slightly lower than the last qtr forecast of 2.8%.  Among the main concerns weighing on execs’ ' minds was trade.  Nearly all respondents said foreign trade retaliation potentially leading to lower exports was either a moderate or serious risk.  About 90% said trade tensions leading to higher consumer costs & lower US economic growth was a risk.  Mexico just issued retaliatory tariffs on US steel & agricultural products, announcing it will impose a 20% tariff on pork, apple & potato imports & 20-25% levies on cheeses & bourbon.  Meanwhile, discussions with China appear to have stalled, as Beijing warns it will go back on a promise to buy more American goods if the US imposes tariffs on $50B worth of Chinese goods by a deadline next week.

US CEOs less optimistic as trade conflicts weigh: survey

Growth in US non-manufacturing increased in May, reaching a 100-month streak of overall expansion.  The Institute of Supply Management's measure of the non-manufacturing sector grew to 58.6 from 56.8 in Apr, beating a forecast of 57.6 (a reading above 50 indicates expansion in the service sector while a reading below 50 signals contraction).  According to the metric, the index of the 17 non-manufacturing industries tracked by the index had saw 100 straight months of expansion.

ISM non-manufacturing index grows in May, expanding for the 100th month

Job openings rose 6.7M in Apr. the Labor Dept said, the best ever in a series that lasts 18 years.  Mar levels were upwardly revised as well, to 6.63M from an initially reported 6.55M.  There were more openings for durable-goods manufacturing & information sector jobs, but decreases in finance & insurance.  The quits rate stayed at 2.3%, matching a post-recession high.  The quits rate is an important measure of labor-market confidence, as it shows a willingness for workers to leave for what are presumed to be better-paying jobs.  As the recession ended, there were about 6 unemployed people for every job opening.  Now, there's 1 unemployed person for every opening, a sign of how the dynamics in the job market have changed.  If anything, companies complain about the available pool of talent.  That said, these firms haven’t aggressively bid up wages to secure the best workers.

Job openings reach record high in April

Early trading is not showing a lot of drama.  But trade negotiations drag on & the signs so far are that this is not going well.  Maybe that's sort of normal given how complex the problems are.  However the buyers keep bidding tech stocks higher, taking NAZ to new record territory.  The Dow continues to look at at the 25K ceiling.

Dow Jones Industrials

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