Thursday, July 19, 2018

Markets slide lower as trade tensions rise

Dow dropped 107, advancers over decliners 5-4 & NAZ lost 37.  MLPs soared 8+ to the 275s & the REIT index added 2+ to the 351s.  Junk bond funds were off slightly & Treasuries crawled higher.  Oil rose 1+ to the high 69s & gold continued to be sold, falling 10 to 1217.

AMJ (Alerian MLP Index tracking fund)

CL=FCrude Oil69.54

GC=FGold  1,216.20

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The US stock market opened lower after eBay (eBAY) forecast Q3 below estimates & investors worried about escalating trade tensions between America & the EU.  The decline follows a 5-day rally & signals investors' focus on Q2 earnings, which so far have topped expectations.  The blue-chip Dow opened down 0.5%, while the broader S&P 500 declined 0.5% & the tech-heavy NAZ Composite also fell 0.5%.  Just over 10% of the companies in the S&P 500 have reported earnings this season, but so far the results are well ahead of expectations.  Dow stock IBM's (IBM) Q2 earnings topped expectations.  The latest economic data was encouraging: The number of Americans filing for first-time jobless benefits fell unexpectedly last week, hitting its lowest level in 48 years, the Labor Dept said.  Asian stocks closed lower & the Stoxx Europe 600 index was down 0.1%, with media companies & basic resources companies among the laggards.  Yesterday US stocks posted mixed results in a tight range as the Dow & broader market edged up but NAZ was mostly level.  The Dow rose 79 (0.3%) to 25,199 & the S&P 500 added 6 (0.2%) to 2815.  The NAZ edged less than a point lower to 7854.  In Asian markets, China’s Shanghai Composite closed the session 0.5% lower & Hong Kong's Hang Seng finished trading down 0.4%.  Japan's Nikkei ended the day down 0.1%. ending a 4-day winning streak.  In Europe, London's FTSE rose 0.2%, Germany's DAX was 0.4% lower & France's CAC was down 0.4%,

EU-US trade tensions weigh on Dow, S&P 500, Nasdaq

China said on comments made by a senior White House official blaming Chinese Pres Xi Jinping for blocking progress on a deal to avert a trade war were "shocking" & "bogus" accusations.  The US & China this month slapped tariffs on $34B of each other's imports in an escalating trade tussle that has roiled financial markets.  Pres Trump has threatened further tariffs unless Beijing agrees to change its intellectual property practices & high-technology industrial subsidy plans.  Yesterday, Larry Kudlow, who heads the White House Economic Council, said that he believed lower-ranking Chinese officials want a deal, including Xi's senior economic adviser Liu He, but that Xi has refused to make changes to China's technology transfer & other trade policies.  Asked about the comments, China's foreign ministry spokeswoman said: "That the relevant United States official unexpectedly distorted the facts and made bogus accusations is shocking and beyond imagination."  "The United States' flip-flopping and promise-breaking is recognized globally," she said.  China has made the utmost efforts to avoid an escalation of trade frictions, Hua said, reiterating that China does not want a trade war but is not afraid of one.  Kudlow said that Xi was "holding the game up."  "I think Liu He and others would like to move but haven't," he added.  "We are waiting for him (Xi). The ball is in his court."  China could end US tariffs "this afternoon by providing a more satisfactory approach" & taking steps that other countries are also calling for, he continued.  China's other trading partners, including the EU, while not supporting tariffs, have also criticized Beijing's trade policies.  China has blamed DC for the trade conflict, with the foreign ministry calling it the biggest "confidence killer" for the global economy, & vowing to fight back if the US continued to be "wilful".

China says US blaming Xi for blocking trade deal is 'bogus'

The number of Americans filing for unemployment benefits unexpectedly fell last week, hitting its lowest level in more than 48 years, as the labor market continues to strengthen.  Initial claims for state unemployment benefits dropped 8K to a seasonally adjusted 207K for the latest week, the lowest reading since 1969, the Labor Dept said.  The forecast called for claims rising to 220K.  The 2nd straight weekly decline in claims, however, likely reflects difficulties adjusting the data for seasonal fluctuations around this time of the year when motor vehicle manufacturers shut assembly lines for annual retooling.  With manufacturers undertaking the retooling exercise at different times in Jul, this can throw off the model that the gov uses to the smooth the claims data for seasonal variations.  The 4-week moving average of initial claims, considered a better measure of labor market trends as it irons out week-to-week volatility, fell 2K to 220K last week.  The claims data covered the survey week for the nonfarm payrolls component of the Jul employment report.  The 4-week average of claims dipped slightly between the Jun & Jul survey periods, suggesting solid job growth this month.  The economy created 213K jobs in Jun, with the unemployment rate rising two-tenths of a percentage point to 4.0% as more Americans entered the labor force, in a sign of confidence in their job prospects.  Fed Chairman Jerome Powell told lawmakers this week that with appropriate monetary policy, the job market will remain strong "over the next several years."  Employment gains averaged 215K jobs per month in the first half of this year.  The labor market is viewed as being near or at full employment.  There were 6.6M unfilled jobs in May, an indication that companies cannot find qualified workers.  That was reinforced by the Fed's Beige Book report yesterday showing worker shortages persisting in early Jul.  The central bank said the scarcity of workers was across a wide range of occupations, including highly skilled engineers, specialized construction & manufacturing workers, information technology professionals & truck drivers.  The Labor Dept's claims report also showed the number of people receiving benefits after an initial week of aid increased 8K to 1.75M in the latest week.  The 4-week moving average of continuing claims rose 6K to 1.74M.

US weekly jobless claims drop to more than 48-1/2-year low

International Business Machines (IBM, a Dow stock) lifted its revenue in Q2, helped by growth in new business lines that constituted more than ½ of overall sales for the period.  Revenue rose 3.7% from a year earlier to $20B, the company's 3rd consecutive quarter of revenue growth.  Analysts had expected $19.9B in revenue.  CEO Ginni Rometty is trying to turn IBM around by pinning its future on a series of fast-growing businesses lumped under what the company calls strategic imperatives, including cloud computing, security & data analytics.  Revenue from those offerings totaled $10.1B in the qtr, up 15% from a year earlier.  "We've done the work to reposition our company," finance chief James Kavanaugh said about the focus on the strategic imperatives markets.  "We are seeing our investments in these high-value segments of the IT industry now paying off."  The 2nd-qtr profit rose 3.1% to $2.4B.  Excluding special items, EPS was $3.08, better than the forecast for adjusted EPS of $3.04.  The stock advanced 3.72.
If you would like to learn more about IBM, click on this link:

IBM rides new businesses to higher revenue, profit

Stocks are being hit with profit taking after the recent advance.  Earnings are getting good marks but trade worries dominated thinking today.  The Dow continues in its sideways trading zone waiting for significant stimulus to extend the current really.

Dow Jones Industrials

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