Dow sank 328 (but 170 above the lows), decliners over advancers about 3-1 & NAZ gave back a very big 160. The MLP index plunged 6 to 261 & the REIT index was fractionally lower to 350 (still strong while stocks have been falling in price). Junk bond funds were weak & Treasuries continued with their rally. Oil fell to the 67s (more below) & gold lost 2 to 1268 despite the decline in stock prices.
AMJ (Alerian MLP Index tracking fund)
![Live 24 hours gold chart [Kitco Inc.]](https://www.kitco.com/images/live/gold.gif?0.17236399986518913)
Chinese Pres Xi Jinping said that he will not hesitate to retaliate against the US on trade. “In the West you have the notion that if somebody hits you on the left cheek, you turn the other cheek,” Xi said. “In our culture, we punch back.” Trade tensions between the US & China have escalated in the last several weeks with the Trump administration's planned tariffs on $50B worth of Chinese imports & Beijing's announcement of counter-duties. Last Mon, Pres Trump said he asked the US trade representative to identify an additional $200B worth of Chinese goods for a 10% tariff. Xi was speaking to the Global CEO Council, a China-organized group of roughly 20 chief execs from mostly Western multinational companies. The council has previously met with Premier Li Keqiang instead of Xi, the report said. “China is not going to yield to outside pressure and eat the bitter fruit,” an unnamed senior official said. “That’s the negotiation principle set by President Xi.”
Xi has strong words for Trump: 'In our culture, we punch back' — report
Treasury Sec Steve Mnuchin said that a forthcoming statement from the gov related to reports of investment restrictions will apply to China & other countries that threaten US intellectual property rights on technology. "On behalf of @realDonaldTrump, the stories on investment restrictions in Bloomberg & WSJ are false, fake news. The leaker either doesn’t exist or know the subject very well. Statement will be out not specific to China, but to all countries that are trying to steal our technology," Mnuchin tweeted. The Trump administration is preparing to announce limits on Chinese investment in the US & block additional technology exports to the Asian country. Early today it was reported that the White House would use "one of the most expansive legal tools" to declare Chinese investment in certain technology-related US companies a threat to economic & national security. The report, citing sources, added that Mnuchin was working on the plan for investment restrictions since as early as Dec, despite supporting a less aggressive approach in negotiations with Beijing. Pres Trump & other Cabinet members have since persuaded Mnuchin "to use blunt tools" in countering risk from Chinese investments. The Treasury is expected to make an announcement on foreign investment in the US this week. US stocks pared their losses slightly after Mnuchin's mid-morning tweet, perhaps on hopes the forthcoming action would be lighter on China than feared. Chinese acquisitions & investments in the US fell 92% to just $1.8B in the first 5 months of this year. The decline follows a sharp drop in H2-2017 as pressure from both Beijing & the Trump administration curbed a recent surge in cross-border.
Treasury Secretary Mnuchin says investment restrictions will apply to 'all countries that are trying to steal our technology'
Sales of new US single-family homes increased more than expected in May as sales in the South surged to their highest level in nearly 11 years. The Commerce Dept said new home sales jumped 6.7% to a seasonally adjusted annual rate of 689K units last month, the highest level since Nov 2017. The Apr sales pace was revised down to 646K units from the previously reported 662K units. Last month's surge in new home sales unwound the Apr drop. The forecast for new home sales, which make up 11% of housing market sales, rising only 0.7% to a pace of 667K. The increase ended 2 straight months of declines. New home sales are drawn from permits & tend to be volatile on a month-to-month basis. They increased 14.1% from a year ago. New home sales are getting a boost from an inventory crunch in the market for previously owned houses. A report last week showed existing home sales falling for a 2nd straight month in May. Supply has lagged strong demand for housing, which is being driven by a robust labor market, leading to a sharp increase in home prices. High mortgage rates so far do not appear to be dampening demand. The 30-year fixed mortgage rate averaged 4.57% last week and has risen more than 50 basis points this year. Further increases are likely after the Federal Reserve raised interest rates earlier this month for a 2nd time this year & forecast 2 more rate hikes by the end of the year. The median new house price fell 3.3% to $313K in May from a year ago, the lowest price in a year. The drop in new home prices is likely to be temporary. There were 299K new homes on the market in May, up 1.0% from Apr. Supply is just over ½ of what it was at the peak of the housing market boom in 2006. Builders are struggling with higher lumber prices as well as labor and land shortages. A survey last week showed confidence among single-family homebuilders dipped in Jun, with builders "increasingly concerned that tariffs placed on Canadian lumber and other imported products are hurting housing affordability."
US new home sales surge in May
US crude drops 50 cents, settling at $68.08, as market braces for more OPEC oil
Russia oil minster: A crude output deal for 2019 is already being planned
A measure of the US economy from the Chicago Federal Reserve turned negative in May for the first time since Jan, tugged into the red by a slump in factory output. The Chicago Fed's index of national economic activity was a negative 0.15 last month, a retreat from the upwardly revised positive 0.42 reading for Apr. The index was also negative in May a year ago. Its less-volatile, 3-month moving average registered a positive 0.19 in May, down from positive 0.48 in Apr, also the lowest reading since Jan's positive 0.08. The Chicago Fed index is a weighted average of 85 economic indicators, designed so that zero represents trend growth & a 3-month average below negative 0.70 suggests a recession has begun. 39 of the 85 individual indicators made positive contributions in May, while 46 made negative contributions. 43 indicators improved from Apr to May, while 42 indicators deteriorated. Production-related indicators, meaning factories, contributed a negative 0.29 to the index in May, down sharply from positive 0.33 in Apr. Other Fed data has shown that manufacturing industrial production decreased 0.7% in May after incraesing 0.6% in Apr. Employment-related indicators contributed a positive 0.13 in May, up slightly from positive 0.12 in Apr. The closely watched monthly employment report out earlier this month revealed that the US created a robust 223K new jobs in May to push unemployment down to an 18-year low of 3.8%. Meanwhile, the contribution of the personal consumption & housing category was a negative 0.04 in May from negative 0.03 in Apr. Housing permits decreased to 1301K annualized units in May from 1364K in Apr, but housing starts increased to 1.35M units in May, up from 1.286M in the previous month (an 11-year high).
Once again, it is difficult to make sense out of the wild gyrations in stocks. That's because nobody truly understands what is going on with the war of words about intl trade. Trade war fears are being played out in real time & that is not good for economies across the globe. The Dow sank to 24.1K today, but buying in the last hour pared the loss. One very odd move in the markets is in gold. It has been a traditional "safe haven" investment. Not now & that puzzles traders. Meanwhile the Dow looks like it will test the 24K floor which could come as soon as tomorrow.
Dow Jones Industrials
AMJ (Alerian MLP Index tracking fund)
Following reports from various media outlets that the US
will further crack down on China's technology Treasury Secretary Steve
Mnuchin took to Twitter to clarify what the administration's moves will
be. Earlier, there were various news reports that
Trump would place new curbs on Chinese investment in US technology
firms & would block additional technology exports to Beijing. According
to reports, initiatives were designed to prevent
Beijing from moving ahead with plans outlined in its “Made in China
2025” report to become a global leader in 10 broad areas of technology. People
familiar with the matter said that the Treasury
Dept is drafting rules that would block firms with 25% or more
Chinese ownership from buying companies that are involved in
“industrially significant technology,” while the National Security
Council & the Commerce Dept are putting together plans for
“enhanced” export controls to prevent these technologies from being
shipped to China.
US will crack down on all countries trying to steal its technology
Chinese Pres Xi Jinping said that he will not hesitate to retaliate against the US on trade. “In the West you have the notion that if somebody hits you on the left cheek, you turn the other cheek,” Xi said. “In our culture, we punch back.” Trade tensions between the US & China have escalated in the last several weeks with the Trump administration's planned tariffs on $50B worth of Chinese imports & Beijing's announcement of counter-duties. Last Mon, Pres Trump said he asked the US trade representative to identify an additional $200B worth of Chinese goods for a 10% tariff. Xi was speaking to the Global CEO Council, a China-organized group of roughly 20 chief execs from mostly Western multinational companies. The council has previously met with Premier Li Keqiang instead of Xi, the report said. “China is not going to yield to outside pressure and eat the bitter fruit,” an unnamed senior official said. “That’s the negotiation principle set by President Xi.”
Xi has strong words for Trump: 'In our culture, we punch back' — report
Treasury Sec Steve Mnuchin said that a forthcoming statement from the gov related to reports of investment restrictions will apply to China & other countries that threaten US intellectual property rights on technology. "On behalf of @realDonaldTrump, the stories on investment restrictions in Bloomberg & WSJ are false, fake news. The leaker either doesn’t exist or know the subject very well. Statement will be out not specific to China, but to all countries that are trying to steal our technology," Mnuchin tweeted. The Trump administration is preparing to announce limits on Chinese investment in the US & block additional technology exports to the Asian country. Early today it was reported that the White House would use "one of the most expansive legal tools" to declare Chinese investment in certain technology-related US companies a threat to economic & national security. The report, citing sources, added that Mnuchin was working on the plan for investment restrictions since as early as Dec, despite supporting a less aggressive approach in negotiations with Beijing. Pres Trump & other Cabinet members have since persuaded Mnuchin "to use blunt tools" in countering risk from Chinese investments. The Treasury is expected to make an announcement on foreign investment in the US this week. US stocks pared their losses slightly after Mnuchin's mid-morning tweet, perhaps on hopes the forthcoming action would be lighter on China than feared. Chinese acquisitions & investments in the US fell 92% to just $1.8B in the first 5 months of this year. The decline follows a sharp drop in H2-2017 as pressure from both Beijing & the Trump administration curbed a recent surge in cross-border.
Treasury Secretary Mnuchin says investment restrictions will apply to 'all countries that are trying to steal our technology'
Sales of new US single-family homes increased more than expected in May as sales in the South surged to their highest level in nearly 11 years. The Commerce Dept said new home sales jumped 6.7% to a seasonally adjusted annual rate of 689K units last month, the highest level since Nov 2017. The Apr sales pace was revised down to 646K units from the previously reported 662K units. Last month's surge in new home sales unwound the Apr drop. The forecast for new home sales, which make up 11% of housing market sales, rising only 0.7% to a pace of 667K. The increase ended 2 straight months of declines. New home sales are drawn from permits & tend to be volatile on a month-to-month basis. They increased 14.1% from a year ago. New home sales are getting a boost from an inventory crunch in the market for previously owned houses. A report last week showed existing home sales falling for a 2nd straight month in May. Supply has lagged strong demand for housing, which is being driven by a robust labor market, leading to a sharp increase in home prices. High mortgage rates so far do not appear to be dampening demand. The 30-year fixed mortgage rate averaged 4.57% last week and has risen more than 50 basis points this year. Further increases are likely after the Federal Reserve raised interest rates earlier this month for a 2nd time this year & forecast 2 more rate hikes by the end of the year. The median new house price fell 3.3% to $313K in May from a year ago, the lowest price in a year. The drop in new home prices is likely to be temporary. There were 299K new homes on the market in May, up 1.0% from Apr. Supply is just over ½ of what it was at the peak of the housing market boom in 2006. Builders are struggling with higher lumber prices as well as labor and land shortages. A survey last week showed confidence among single-family homebuilders dipped in Jun, with builders "increasingly concerned that tariffs placed on Canadian lumber and other imported products are hurting housing affordability."
US new home sales surge in May
Oil fell as investors prepared for an
extra 1M barrels per day (bpd) of oil to hit the markets after
OPEC agreed to raise production & as US equity markets slipped on
trade war fears. US lite crude ended today's session down 50¢ at $68.08 a barrel & Brent crude futures fell 68¢ to $74.87 a barrel. Losses in US crude prices were
limited by the likelihood that an outage at Syncrude Canada's 360K
barrel per day oil sands facility would last thru Jul. The outage is
expected to limit crude arriving at Cushing, Oklahoma, delivery point
of the US futures contract. This helped further shrink US crude's discount to
global benchmark Brent to as small as $4.78. The spread had widened to
as much as $11.57 on Jun 1, but had been contracting ahead of OPEC's
expected supply increase. The slide in stocks
pressured oil. Last week, OPEC & its allies agreed to modestly boost global crude supplies. The group, which has been
curbing output since 2017, said it would raise supply by returning to
100% compliance with previously agreed output cuts, after months
of underproduction. The group's output has been below targeted cuts
largely because of unplanned disruptions in places such as Venezuela &
Angola. The head of Saudi oil
giant Aramco said it has spare capacity of 2M bpd & can meet
additional oil demand in case of any interruption in supplies. The deal demonstrates the strength of the Russia-Saudi energy
alliance, which will help stabilize the market for many years to come,
the head of Russia's sovereign wealth fund said.
US crude drops 50 cents, settling at $68.08, as market braces for more OPEC oil
OPEC & non-OPEC members are already considering
an oil output deal for 2019, Russia’s energy minister said,
immediately after the the cartel of major crude producers agreed to
raise production from Jul. “We are planning to sign a new agreement by the end of this year,” Alexander Novak said at the OPEC summit in Vienna. “The conceptual framework of that agreement was
shared with all the participants of today’s ministerial meeting, so that
they could study it and make any amendments.” His comments come after the meeting on Sat between OPEC producers & non members. The oil
producing allies, including Russia, agreed to raise oil output by a
total of 1M barrels per day (bpd) in order to balance supply & demand in H2. The deal expires at the end of 2018, but Novak said that an additional proposal was already being planned. “This agreement will, to a
large part, be based on the monitoring of the market situation, on the
creation and institutionalization of the governing body and the ability
to take measures, if necessary, as was done in 2016,” he added. The draft agreement would
be considered again at the next meeting of the monitoring committee in
Sep, Novak & added, “with the view to sign it at the ministerial
meeting at the end of the year.” The minister said that
this weekend’s deal to raise oil output by one million bdp “should be
sufficient,” despite Russia originally arguing that a 1.5M barrel
hike should be implemented. “We are not yet concerned
in any way by this decision because the mechanism we have is quite
flexible and allows us to take different decisions in the future,” he
said. As part of new deal, Russia plans to increase its output by 200K bpd.
Russia oil minster: A crude output deal for 2019 is already being planned
A measure of the US economy from the Chicago Federal Reserve turned negative in May for the first time since Jan, tugged into the red by a slump in factory output. The Chicago Fed's index of national economic activity was a negative 0.15 last month, a retreat from the upwardly revised positive 0.42 reading for Apr. The index was also negative in May a year ago. Its less-volatile, 3-month moving average registered a positive 0.19 in May, down from positive 0.48 in Apr, also the lowest reading since Jan's positive 0.08. The Chicago Fed index is a weighted average of 85 economic indicators, designed so that zero represents trend growth & a 3-month average below negative 0.70 suggests a recession has begun. 39 of the 85 individual indicators made positive contributions in May, while 46 made negative contributions. 43 indicators improved from Apr to May, while 42 indicators deteriorated. Production-related indicators, meaning factories, contributed a negative 0.29 to the index in May, down sharply from positive 0.33 in Apr. Other Fed data has shown that manufacturing industrial production decreased 0.7% in May after incraesing 0.6% in Apr. Employment-related indicators contributed a positive 0.13 in May, up slightly from positive 0.12 in Apr. The closely watched monthly employment report out earlier this month revealed that the US created a robust 223K new jobs in May to push unemployment down to an 18-year low of 3.8%. Meanwhile, the contribution of the personal consumption & housing category was a negative 0.04 in May from negative 0.03 in Apr. Housing permits decreased to 1301K annualized units in May from 1364K in Apr, but housing starts increased to 1.35M units in May, up from 1.286M in the previous month (an 11-year high).
Chicago Fed’s May national economic index retreats into negative as factories slowed
Once again, it is difficult to make sense out of the wild gyrations in stocks. That's because nobody truly understands what is going on with the war of words about intl trade. Trade war fears are being played out in real time & that is not good for economies across the globe. The Dow sank to 24.1K today, but buying in the last hour pared the loss. One very odd move in the markets is in gold. It has been a traditional "safe haven" investment. Not now & that puzzles traders. Meanwhile the Dow looks like it will test the 24K floor which could come as soon as tomorrow.
Dow Jones Industrials
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