Dow sank another 567, decliners over advancers 5-1 & NAZ gave back 114. The MLP index & the REIT index fell 5 to 354. Junk bond funds declined & Treasuries were in demand, with the yield on the 10 year Treasury dropping a big 8 basis points to 2.85%. Oil dropped 2+, going below 51, & gold rose 6 to 1248 (after spending much of the year around 1200).
AMJ (Alerian MLP Index tracking fund)
The US trade deficit jumped to a 10-year high in Oct as soybean exports continued to fall & imports of consumer goods rose to a record high, suggesting the administration's tariff-related measures to shrink the trade gap likely have been ineffective. The Commerce Dept said the trade deficit increased 1.7% to $55.5B, the highest level in 10 years. The trade gap has now widened for a 5 straight months. The politically sensitive goods trade deficit with China surged 7.1% to a record $43.1B in Oct. The US is locked in a bitter trade war with China & has imposed tariffs on $250B worth of Chinese imports to force concessions on a list of demands that would change the terms of trade between the 2 countries. China has responded with import tariffs on US goods, including soybeans. Pres Trump has long railed against China's trade surplus with the US & accuses Beijing of not playing fairly on trade. In addition to the duties on Chinese goods, DC has slapped tariffs on steel & aluminum imports into the US this year. Last Sat, Trump & Chinese Pres Xi Jinping agreed to hold off on imposing more tariffs for 90 days while they negotiate a deal to end the trade dispute. The forecast had called for the overall trade deficit rising to $55B in Oct. When adjusted for inflation, the goods trade deficit increased to $87.9B from $87.2B in Sep. The real trade deficit is above the average for Q3. This suggests trade will probably be a drag on GDP in Q4 & adds to weak housing & business spending on equipment reports in signaling a slowing down in economic growth. Trade subtracted 1.91 percentage points from GDP growth in the Jul-Sep qtr. Growth estimates for Q4 are around a 2.8% annualized rate after the economy grew at a 3.5% pace Q3. In Oct, exports of goods & services slipped 0.1% to $211B. Soybean exports, which have been targeted by China in the trade dispute, dropped $0.8B. Exports of civilian aircraft & engines also fell. But exports of petroleum & consumer goods were the highest on record. A strong $ is probably restraining overall export growth. Imports of goods & services rose 0.2% to $266.5B, an all-time high. Consumer goods imports increased by $2B to a record high of $57.4B, boosted by a $1.5B jump in imports of pharmaceutical preparations. Motor vehicle imports were the highest on record in Oct, as were imports of other goods. Imports are being driven by strong domestic demand as well as the strong $, which is making the prices of imported goods cheaper, likely offsetting the impact of tariffs.
International trade deficit surges to highest in a decade as imports rise, US exports drop
US factory orders post largest drop in more than a year
Service sector grows in November despite tariff, employment concerns
The stock market is plunging & this is one of its worst periods in years. Trade war concerns are bringing out the bears who have taken command. A technical rebound is in order for the short-term oversold conditions but worries about trade wars & rising interest rates (the Fed meeting is Dec 18-19) are too much for the bulls to handle. Try to keep cool in these tough times!
Dow Jones Industrials
AMJ (Alerian MLP Index tracking fund)
| CL=F | Crude Oil | 51.58 | -1.31 | -2.5% |
| GC=F | Gold | 1,249.10 | +6.50 | +0.5% |
Equities fell, putting the main stock
index in negative territory for the year, Canadian authorities
arrested the CFO of Chinese telecom giant Huawei at
the request of US authorities. The arrest of Meng Wanzhou, who faces extradition to the
US, raises the stakes for, & possibly threatens, the
recently restarted US-China trade talks. The specific charge or charges against the
daughter of Huawei's founder were not disclosed, but US
officials have been investigating the company for possibly violating
American trade sanctions against Iran. Investors
were rattled. The intraday decline in the blue-chip Dow put the widely watched index in negative territory
for 2018. Meanwhile, oil prices extended their losses
despite OPEC members agreeing today to cut oil output, although
it's unclear by how much. West Texas Intermediate, the US benchmark crude oil, fell nearly 3% to $51.41 per barrel. Global stocks also fell. Asian stocks closed down & Japan's
Nikkei 225 index was off 1.9%, while the Hang Seng ended off
1.2%. China's Shanghai Composite settled down 1.7%. European
bourses were also lower. Britain's FTSE 100 was 2.6% lower,
France's CAC 40 was off 2.4% & Germany's Dax was falling 2.6%.
US stocks extend losses on Huawei CFO arrest
The US trade deficit jumped to a 10-year high in Oct as soybean exports continued to fall & imports of consumer goods rose to a record high, suggesting the administration's tariff-related measures to shrink the trade gap likely have been ineffective. The Commerce Dept said the trade deficit increased 1.7% to $55.5B, the highest level in 10 years. The trade gap has now widened for a 5 straight months. The politically sensitive goods trade deficit with China surged 7.1% to a record $43.1B in Oct. The US is locked in a bitter trade war with China & has imposed tariffs on $250B worth of Chinese imports to force concessions on a list of demands that would change the terms of trade between the 2 countries. China has responded with import tariffs on US goods, including soybeans. Pres Trump has long railed against China's trade surplus with the US & accuses Beijing of not playing fairly on trade. In addition to the duties on Chinese goods, DC has slapped tariffs on steel & aluminum imports into the US this year. Last Sat, Trump & Chinese Pres Xi Jinping agreed to hold off on imposing more tariffs for 90 days while they negotiate a deal to end the trade dispute. The forecast had called for the overall trade deficit rising to $55B in Oct. When adjusted for inflation, the goods trade deficit increased to $87.9B from $87.2B in Sep. The real trade deficit is above the average for Q3. This suggests trade will probably be a drag on GDP in Q4 & adds to weak housing & business spending on equipment reports in signaling a slowing down in economic growth. Trade subtracted 1.91 percentage points from GDP growth in the Jul-Sep qtr. Growth estimates for Q4 are around a 2.8% annualized rate after the economy grew at a 3.5% pace Q3. In Oct, exports of goods & services slipped 0.1% to $211B. Soybean exports, which have been targeted by China in the trade dispute, dropped $0.8B. Exports of civilian aircraft & engines also fell. But exports of petroleum & consumer goods were the highest on record. A strong $ is probably restraining overall export growth. Imports of goods & services rose 0.2% to $266.5B, an all-time high. Consumer goods imports increased by $2B to a record high of $57.4B, boosted by a $1.5B jump in imports of pharmaceutical preparations. Motor vehicle imports were the highest on record in Oct, as were imports of other goods. Imports are being driven by strong domestic demand as well as the strong $, which is making the prices of imported goods cheaper, likely offsetting the impact of tariffs.
International trade deficit surges to highest in a decade as imports rise, US exports drop
New orders for US-made goods recorded their
biggest drop in more than a year in Oct & business spending on
equipment appeared to be softening, suggesting a slowdown in activity in
the manufacturing sector. Factory goods orders fell 2.1%
amid a decline in demand for a range of goods, the Commerce Dept
said. That was the largest decrease in orders since July2017. Data for Sep was revised lower to show factory orders rising
only 0.2% instead of the previously reported 0.7%
increase. The forecast for factory orders called for a decline of 2.0% in
Oct. Orders increased 8.3% on a year-on-year basis in
Oct. An Institute for Supply Management survey of
manufacturers published on Mon showed an improvement in business
conditions in Nov. Manufacturers across nearly all industries,
however, complained that worker shortages & the administration's
import tariffs were disrupting operations. In Oct, orders for
transportation equipment tumbled 12%, the biggest drop in 1 year, reflecting a 59.3% plunge in orders for defense
aircraft & parts after equipment orders rose 0.9% in
Sep. Orders for civilian aircraft & parts dropped 22.2% & orders for motor vehicles slipped 0.1%. There
were also declines in orders for primary metals & machinery. But
orders for computers & electronic products rose, as did those for
fabricated metal products & electronic equipment, appliances &
components. The report also said Oct orders for non-defense capital
goods excluding aircraft, which are seen as a measure of business
spending plans on equipment, were unchanged, as reported last month.
Orders for core capital goods dropped 0.6% in
Sep. Shipments of core capital goods, which are used to
calculate business equipment spending in GDP, rose 0.3% in Oct, as reported last month. Core
capital goods shipments fell 0.3% in Sep. Business spending
on equipment has slowed since Q2 after strong growth in
2017 & early 2018, despite the $1.5T
tax cut.
Some companies including Apple used their tax windfall to buy back shares on a massive scale. Spending on equipment could also be undercut by declining oil prices.
Some companies including Apple used their tax windfall to buy back shares on a massive scale. Spending on equipment could also be undercut by declining oil prices.
US factory orders post largest drop in more than a year
The US services sector expanded in the month of
Nov, according to report by the Institute for
Supply Management. The ISM non-manufacturing index rose to 60.7
last month. The forecast for the ISM
non-manufacturing index to hit 59.7 for Nov, down slightly from
60.3 in Oct. A reading above 50 percent indicates the
non-manufacturing sector economy is generally expanding. “The non-manufacturing sector continued to reflect strong growth in
November. However, concerns persist about employment resources and the
impact of tariffs,” said Anthony Nieves, ISM chair. Notwithstanding those concerns, “respondents remain positive about
current business conditions and the direction of the economy.” Despite
the better-than-anticipated number, US equities held near sessions
lows following the release. The index is down about 14K in the last 2 trading sessions as fears of economic slowdown & an inverted yield
curve spook investors. The data release came after ADP &
Moody’s Analytics reported that companies slowed the pace of job
creation in Nov amid a tight labor market. The 2 firms said
earlier that private companies added 179K payrolls last
month, under the estimate for a gain of 195K. ISM
reported earlier in the week that manufacturing activity rose last
month. The ISM manufacturing index increased in Nov to 59.3 from
57.7 in Oct.
Service sector grows in November despite tariff, employment concerns
The stock market is plunging & this is one of its worst periods in years. Trade war concerns are bringing out the bears who have taken command. A technical rebound is in order for the short-term oversold conditions but worries about trade wars & rising interest rates (the Fed meeting is Dec 18-19) are too much for the bulls to handle. Try to keep cool in these tough times!
Dow Jones Industrials
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