Dow gained 105, advancers over decliners better than 3-1 & NAZ went up 38. The MLP index recovered 1+ to the 285s & the REIT index was steady in the 353s. Junk bond funds crawled a little higher & Treasuries slid lower. Oil shot up to the 68s & gold added 5 to 1204.
AMJ (Alerian MLP Index tracking fund)
Stocks cautiously higher, Home Depot results boost Dow
Small business optimism at 35-year high
Import prices were flat in July, suggesting a strong dollar kept inflation pressures in check
In less than 5 months, the Trump administration has collected more than $1.4B in new revenue from steel & aluminum tariffs, according to a recent report prepared for members of Congress. The Congressional Research Service (CRS) estimated that, between Mar 23-July 16, the US reaped $1.1B & $344.2M from levies on foreign steel & aluminum, respectively. Those earnings are on the rise as trade negotiations with allies linger on & Pres Trump moves to hike tariff rates on countries like Turkey. CRS says the new tariffs could reap the US $7.5B, $5.8B on steel & $1.7B on aluminum – based on last year's import levels. In 2017, the US imported $29B worth of steel products covered the tariffs & $17.4B worth of aluminum. Trump has suggested the tariffs, originally unveiled as a national security provision, could have the added benefit of reducing the federal deficit, which rose to $77B in Jul, wider than the Jul 2017 budget deficit of $43B. And the Treasury's borrowing to fund gov operations is set to top $1T this year for the first time. "Because of Tariffs we will be able to start paying down large amounts of the $21 Trillion in debt that has been accumulated," Trump tweeted last week. "At minimum, we will make much better Trade Deals for our country!" When asked about the revenue generated by tariffs, Treasury Secr Steve Mnuchin, demurred saying: "We're early in the stages, so I'm not going to give specific numbers … our long-term objective is not to collect tariffs. Our longer-term objective is to have free and fair and reciprocal trade." Tariff payments are collected by the Customs & Border Patrol & go directly into the Treasury's general coffers. The CRS acknowledged that tariff revenue would be impacted by "dynamic effects," like exclusions granted by the Commerce Dept & reimbursements to companies that have already been paying tariffs. As of Aug 6, Commerce had received 33K exclusion requests, approving 1428 requests, while denying 702. That leaves 10s of Ks of requests unanswered, & companies operating under uncertain conditions in the meantime. Metal Partners Intl, an Illinois-based rebar company, has swallowed price increases on steel of more than $3M since May as it awaits the outcome of its exclusion request. Higher prices await a new shipment of steel en route to Houston from Turkey, in the wake of the Trump's official doubling of steel tariffs on Turkey to 50%. "This is certainly a shock wave to us right now," Frank Bergren, owner of Metal Partners, said.
US reaps more than $1.4 billion from steel and aluminum tariffs
The stock market is feeling better with sense of calm for the Turkish lira. Optimism by small business owners & the report on extra tariff money collected by the Treasury got more investors to buy stocks today. The Dow is back to breakeven for the week. However, never a dull moment in DC, even if this is the middle of sluggish Aug.
Dow Jones Industrials
AMJ (Alerian MLP Index tracking fund)
| CL=F | Crude Oil | 67.98 | +0.78 | +1.2% |
| GC=F | Gold | 1,204.20 | +5.30 | +0.4% |
Stocks were cautiously higher as Turkey's
lira weakened only slightly following its recent plunge, which caused
investors to turn risk adverse. The risk
aversion sent US stocks lower on yesterday, but with the lira stabilizing
investors could turn their attention to the strong US
economy. While earnings season is winding down,
retail earnings were the focus today, headlined by Dow component
Home Depot (HD). The home improvement retailer reported earnings & revenue
that beat the estimate, led by a rebound in its seasonal
business. In economic news, data on imported goods
were released, with costs flat in Jul. But the annual rate of import
inflation jumped to 4.8%, its highest since 2012. Costs were led by energy, excluding fuel the
rise was only 1.3%. On an annual basis, export prices were up 4.3%. In commodities, oil futures were
higher boosted by reports that Saudi Arabia is curbing production
despite its agreement in Jun to boost output after oil rallied to a
3½-year high. But yesterday OPEC forecast lower demand for its crude
next year.
Stocks cautiously higher, Home Depot results boost Dow
Small business owners' optimism touched a 35-year
high in Jul, with businesses setting records in terms of job creation & hiring, while they cited the availability of qualified workers as
their biggest challenge. In another signal of just how good this economy
is, the small business owners also noted that they were able to
increase prices. In Jul 2018, the NFIB's Small
Business Optimism Index marked its 2nd highest level in the survey's
45-year history, at 107.9, just shy of the Jul 1983 record-high of
108. Records were set for job creation plans. A
seasonally-adjusted net 23% of businesses are planning to create
new jobs, while 37% of business owners said they had job
openings that they could not fill in Jul. “Small
business owners are leading this economy and expressing optimism
rivaling the highest levels in history,” said NFIB CEO
Juanita Duggan. “Expansion continues to be a priority for small
businesses who show no signs of slowing as they anticipate more sales
and better business conditions.” A
net 35% of owners expect better business conditions, while they
said the availability of qualified workers was their #1 problem.
Owners also reported that they were increasing the compensation they
offered workers. 49% of firms
were hiring or trying to hire, while 52% (88% of those
hiring or trying to hire) reported few or no qualified applicants for
the positions they were trying to fill. 23% of owners said their biggest business problem was finding qualified workers. “Despite
challenges in finding qualified workers to fill a record number of job
openings, they’re taking advantage of this economy and pursuing growth,”
according to the NFIB. Profits continued to perform more firms raised prices in Jul, a positive signal of demand.
Small business optimism at 35-year high
US import prices were unexpectedly flat in Jul
as a surge in the cost of fuels was offset by weak prices elsewhere,
suggesting a strong $ was keeping imported inflation pressures in
check. The Labor Dept said the unchanged reading in import prices last month followed an upwardly
revised 0.1% drop in Jun. Import prices were previously reported
to have declined 0.4% in Jun. The forecast import called for prices gaining 0.1% in Jul. In the 12 months thru Jul, import prices rose 4.8%, the largest gain since 2012,
after increasing 4.7% in Jun. Last month, prices for
imported fuels & lubricants jumped 1.6% after rising 1.3% in Jun. Food prices dropped 1.8% after declining 2.6% in Jun. Excluding fuels & food, import prices slipped 0.1% in Jul after falling 0.2% in the prior month. Core import
prices increased 1.6% in the 12 months thru Jul. The monthly
drop in core import prices likely reflects the $'s 0.5%
appreciation against the currencies of the US main trading
partners. The $ has gained more than 4% on a
trade-weighted basis so far this year, which could temper the
anticipated increases in the prices of some imported goods as a result
of trade tensions between the US & major economies. Import prices for nonfuel
industrial supplies & materials tumbled 1.0%, the
biggest monthly drop since Jan 2016, after rising 0.2% in
Jun & the cost of imported capital goods dipped 0.1% after a
similar drop in Jun. Imported motor vehicle
prices were unchanged. The cost of consumer goods excluding automobiles
rose 0.3% after dropping 0.3% in Jun. Prices for goods imported
from China fell 0.2% in Jul, the first drop since Sep
2017, after edging up 0.1& in the prior month. Prices for Chinese
imports rose 0.2% in the 12 months thru Jul. Export prices fell 0.5% in Jul after rising 0.2% in Jun.
Prices for agricultural products fell 5.3% last month, weighed
down by a 14.1% plunge in soybean prices. Export prices increased 4.3% on a year-on-year basis in Jul after rising 5.3% in Jun.
Import prices were flat in July, suggesting a strong dollar kept inflation pressures in check
In less than 5 months, the Trump administration has collected more than $1.4B in new revenue from steel & aluminum tariffs, according to a recent report prepared for members of Congress. The Congressional Research Service (CRS) estimated that, between Mar 23-July 16, the US reaped $1.1B & $344.2M from levies on foreign steel & aluminum, respectively. Those earnings are on the rise as trade negotiations with allies linger on & Pres Trump moves to hike tariff rates on countries like Turkey. CRS says the new tariffs could reap the US $7.5B, $5.8B on steel & $1.7B on aluminum – based on last year's import levels. In 2017, the US imported $29B worth of steel products covered the tariffs & $17.4B worth of aluminum. Trump has suggested the tariffs, originally unveiled as a national security provision, could have the added benefit of reducing the federal deficit, which rose to $77B in Jul, wider than the Jul 2017 budget deficit of $43B. And the Treasury's borrowing to fund gov operations is set to top $1T this year for the first time. "Because of Tariffs we will be able to start paying down large amounts of the $21 Trillion in debt that has been accumulated," Trump tweeted last week. "At minimum, we will make much better Trade Deals for our country!" When asked about the revenue generated by tariffs, Treasury Secr Steve Mnuchin, demurred saying: "We're early in the stages, so I'm not going to give specific numbers … our long-term objective is not to collect tariffs. Our longer-term objective is to have free and fair and reciprocal trade." Tariff payments are collected by the Customs & Border Patrol & go directly into the Treasury's general coffers. The CRS acknowledged that tariff revenue would be impacted by "dynamic effects," like exclusions granted by the Commerce Dept & reimbursements to companies that have already been paying tariffs. As of Aug 6, Commerce had received 33K exclusion requests, approving 1428 requests, while denying 702. That leaves 10s of Ks of requests unanswered, & companies operating under uncertain conditions in the meantime. Metal Partners Intl, an Illinois-based rebar company, has swallowed price increases on steel of more than $3M since May as it awaits the outcome of its exclusion request. Higher prices await a new shipment of steel en route to Houston from Turkey, in the wake of the Trump's official doubling of steel tariffs on Turkey to 50%. "This is certainly a shock wave to us right now," Frank Bergren, owner of Metal Partners, said.
US reaps more than $1.4 billion from steel and aluminum tariffs
The stock market is feeling better with sense of calm for the Turkish lira. Optimism by small business owners & the report on extra tariff money collected by the Treasury got more investors to buy stocks today. The Dow is back to breakeven for the week. However, never a dull moment in DC, even if this is the middle of sluggish Aug.
Dow Jones Industrials
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