Dow bounced back 256, advancers over decliners about 3-1 & NAZ gained 61. The MLP index was steady at 261 & the REIT index inched higher in the 352s. Junk bond funds hardly budged & Treasuries were steady today. Oil rose over 64 & gold added all of 1 to 1252.
AMJ (Alerian MLP Index tracking fund)
Small companies rule the second quarter
U.S. consumer spending rose 0.2% in May
Japan's gov warned that a higher US tariff on auto imports could backfire, jeopardizing hundreds of thousands of American jobs created by Japanese auto-related companies, raising prices for US consumers & devastating the US & global economy. Japan submitted a position paper to the Dept of Commerce. In May, Trump ordered the dept to conduct an investigation to determine if higher tariffs on foreign-made vehicles & auto parts were justified on national security grounds. The move outraged Japanese automakers, which have invested B$ in US plants that directly employ tens of thousands of workers. Any trade restrictions, if imposed, would increase costs for US consumers & "could seriously affect" the jobs, the report said. It added the measures would put a brake on global trade, seriously disrupt the market and put global free trade "at great risk." It said US automakers would lose competitiveness & export markets would shrink, affecting US auto-related industries in & outside the country, & "eventually undermine the entire U.S. economy." Japan said up to 624,K people could lose their jobs in the US if a 25% tariff were levied on automobiles & auto parts & other countries took retaliatory measures. Already hit by increased US steel & aluminum tariffs, Japan has told the World Trade Organization it may levy retaliatory tariffs on US goods totaling about ¥50B ($450M) a year. Japan alleged that "broad trade restriction measures on automobiles and auto parts in the name of security raise serious questions about the compliance with the WTO agreements." Possible rebalancing or retaliatory measures from other countries could also damage US manufacturing & agricultural industries, it said. The report added Japanese auto-related companies have played a vital role in contributing to the growth of the US manufacturing base since the 1980s. They have created over 1.5M jobs across America & produce about 3.8M cars in the US. Japanese companies have invested over $48B in the US, sustaining jobs, developing human resources & competitiveness, & contributing to American society like any US company, the report said.
It looks like trading will close the qtr on a positive note. But it has been a very volatile time for the stock market, especially for investors who have gotten used to a pretty much a rally mode for years with only minor dips along the way. Trade wars conducted by announcements & retaliation to those announcements could last for some time. That would make for a bumpy road ahead.
Dow Jones Industrials
AMJ (Alerian MLP Index tracking fund)
| CL=F | Crude Oil | 74.12 | +0.67 | +0.9% |
| GC=F | Gold | 1,252.00 | +1.00 | +0.1% |
Today marks the last full-trading day of Q2. Markets were influenced by geopolitics with trade & tariffs taking center stage while oil saw a big rally as the US moved to
increase sanctions on Iran while Venezuela's production challenges
continued. As of today, the Dow was on track to close fractionally higher this
qtr & even though the gain will likely be less than a full %, it will be the biggest gain for the Dow since Q4-2017. For the month of Jun, the Dow is on track to finish at
a loss. The S&P 500 Index could close up
2.9% this qtr, & if so, it would be the largest one qtr point & percentage gain since Q4-2017. The top
performing sector of the S&P 500 should be energy, which was up by more than 10% currently. Consumer discretionary &
info tech stocks were also big gainers. So far, financials &
industrial were laggards. The solid showing in the tech sector is apparent
when looking at NAZ. It is on track to finish up over
6%, its largest one qtr point gain since Q1-2017.
The NAZ has posted gains for 8 consecutive qtrs. The
Russell 2000 Index, which is comprised of small cap companies could
finish the quarter up over 7.5%, its largest one qtr percentage gain
since Q4-2016.
Small companies rule the second quarter
US consumers only modestly increased their
spending in May despite improved incomes, as year-over-year inflation
posted its largest increase in over 6 years. Personal
consumption expenditures, a measure of household spending on everything
from gasoline to coffee machines, increased a seasonally adjusted 0.2%
in May from the prior month, the Commerce Dept reported. Personal income, reflecting Americans' pretax earnings from salaries & other sources including investments, rose 0.4% in May. The forecast called for a 0.4% rise in both incomes & spending. Americans moderated their spending in May after 2 strong months of growth, as the 0.2% increase was the weakest since
Feb. Apr's spending was revised to a
0.5% increase from a earlier 0.6% reading, while Mar spending was
revised higher to 0.6%. Consumer spending accounts for more than 2/3 of US economic output. The report
showed inflation firmed. The price index for personal consumption
expenditures, the Fed's preferred inflation measure, rose
0.2% in May & was up 2.3 % from a year earlier. Excluding
volatile food & energy costs, prices rose 0.2% in May from Apr &
2% from a year earlier. Both year-over-year inflation measures posted
their largest increase in more than 6 years, since Mar 2012. The
Fed targets 2% year-over-year inflation & has been raising short-term
interest rates to prevent the economy from overheating. Officials voted
earlier this month to increase their benchmark federal-funds rate by a
qtr percentage point to a range of 1.75-2.00%. Officials
have penciled in 2 further qtr-point rate increases for 2018. The
Commerce Dept said lower spending on services like household
utilities in May was partially offset by more spending on goods,
particularly on recreational goods & vehicles. Outlays for goods rose
0.4%. Spending on durable goods - expensive items like cars &
appliances - rose 0.1%, while spending on services also rose 0.1%. Today"s
report followed a strong reading on the labor market in May. Earlier
this month, the Labor Dept said US employers added 223K jobs
last month & the jobless rate in May ticked down to a seasonally
adjusted 3.8%, the lowest since 2000. Average hourly earnings
edged up 2.7% from a year earlier.
U.S. consumer spending rose 0.2% in May
While the White House's chief economic adviser
wouldn’t go as far as to say that President Trump's steel & aluminum
tariffs are a negotiating tactic to gain leverage for a free trade
system, he did acknowledge that the pres has a vision of free &
open trade. “As someone who has followed this
for a very long time, the world trade system is broken. China is
probably the biggest offender, but others are guilty, too,” Larry
Kudlow, director of the National Economic Council, said. “We should be
able to do business. We should be able to come through with successful
deals.” The pres spurred what some say is
akin to an intl trade war with traditional American allies –
Canada, Mexico & the EU – as well as with China when he
announced the tariffs in Feb. Since then,
Trump has pushed forward with tariffs, including a 25% tariff on $50B worth of Chinese goods containing “industrially significant
technologies.” His decision brought swift retribution, with
Beijing responding in kind by slapping tariffs worth $34B on 545
American goods. Its tariffs, in total, will be worth about $50B. Trump has repeatedly argued that tariffs will
eliminate the $370B trade deficit with China & stop Beijing's
theft of US intellectual property, which he's said costs the US B$ each year. In May, China agreed to “significantly
reduce” the deficit by boosting the number of American goods it buys. “The
system is broken. The tariff walls and the non-tariff barriers and the
subsidies have gone up around the world,” Kudlow said. “And his vision
has always been a free trade vision. But to get there -- as he said in
the G-7 meetings -- let’s be tariff free, let’s be non-tariff, barrier
free.’
Trump wants ‘free and open trade’, but tariffs have an end goal: Kudlow
Japan's gov warned that a higher US tariff on auto imports could backfire, jeopardizing hundreds of thousands of American jobs created by Japanese auto-related companies, raising prices for US consumers & devastating the US & global economy. Japan submitted a position paper to the Dept of Commerce. In May, Trump ordered the dept to conduct an investigation to determine if higher tariffs on foreign-made vehicles & auto parts were justified on national security grounds. The move outraged Japanese automakers, which have invested B$ in US plants that directly employ tens of thousands of workers. Any trade restrictions, if imposed, would increase costs for US consumers & "could seriously affect" the jobs, the report said. It added the measures would put a brake on global trade, seriously disrupt the market and put global free trade "at great risk." It said US automakers would lose competitiveness & export markets would shrink, affecting US auto-related industries in & outside the country, & "eventually undermine the entire U.S. economy." Japan said up to 624,K people could lose their jobs in the US if a 25% tariff were levied on automobiles & auto parts & other countries took retaliatory measures. Already hit by increased US steel & aluminum tariffs, Japan has told the World Trade Organization it may levy retaliatory tariffs on US goods totaling about ¥50B ($450M) a year. Japan alleged that "broad trade restriction measures on automobiles and auto parts in the name of security raise serious questions about the compliance with the WTO agreements." Possible rebalancing or retaliatory measures from other countries could also damage US manufacturing & agricultural industries, it said. The report added Japanese auto-related companies have played a vital role in contributing to the growth of the US manufacturing base since the 1980s. They have created over 1.5M jobs across America & produce about 3.8M cars in the US. Japanese companies have invested over $48B in the US, sustaining jobs, developing human resources & competitiveness, & contributing to American society like any US company, the report said.
Japan to US: Auto tariff would damage US, world economy
It looks like trading will close the qtr on a positive note. But it has been a very volatile time for the stock market, especially for investors who have gotten used to a pretty much a rally mode for years with only minor dips along the way. Trade wars conducted by announcements & retaliation to those announcements could last for some time. That would make for a bumpy road ahead.
Dow Jones Industrials
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