Tuesday, May 28, 2019

Markets fall as treasury yields decline

Dow dropped 237 (300+ below early highs), decliners over advancers about 2-1 & NAZ lost 29.  The MLP index fell 2+ to the 247s & the REIT index retreated 2+ to the 381s.  Junk bond funds drifted lower while Treasuries were in heavy demand.  Oil went up in the 58s while gold gave back 5 to 1278.

AMJ (Alerian MLP Index tracking fund)

New data showed the number of Chinese visitors to the US is dropping as cities & other tourist hubs are looking for ways to reverse the movement.  Data from the National Travel & Tourism Office found travel from China to the US fell 5.7% in 2018 to 2.9M visitors, marking the first time since 2003 that Chinese travel to the US slipped from the year prior.  The trade war between the US & China could be one of the contributing factors of the tourism drop.  The US now has a 25% tariff on $200B worth of Chinese imports, while China has retaliated with tariffs on $60B of US imports.  Another reason for the decline could be in wake of China issuing a travel warning for the US last summer, telling its citizens to beware of shootings, robberies & high costs of medical care.  The US later struck back by issuing a warning to Americans about travel to China.  Another possible reason behind the tourism decline is economic uncertainty in China, which is leading many citizens to either travel closer to home -- like to Hong Kong, Macau or Taiwan, for example.  Chinese travel to the US has been leveling out after it boomed earlier in the decade.  In 2000, 249K Chinese visited the US.  That number tripled to 802K by 2010, then tripled again by 2015, in part because of higher incomes, better long-haul flight connections & an easing of visa restriction.  In 2016 & 2017, more than 3M Chinese visitors came to the US, but year-over-year growth edged up just 4% in 2017, the slowest pace in more than a decade.  Most industry-watchers agree that any downturn is temporary, since China's middle class will only continue to expand.  The US gov forecasts Chinese tourism will grow 2% this year to 3.3M visitors & will reach 4.1M in 2023.  Overall, intl travel to the US has decreased.  Spending by Chinese visitors, which doesn't include students, has increased more than 600% between 2008 & 2016 to nearly $18.9B.  To hold on to that money, experts said the US tourism industry must do more to keep up with Chinese travelers & their changing needs.

Chinese tourism to US declines for first time since 2003

Gold for Jun delivery fell $6.50 (0.5%) to settle at $1277 an ounce, while Jul silver lost 23¢ (1.6%) to $14.32 an ounce, a fresh settlement low for 2019.  Regular metals trading was closed yesterday for the Memorial Day holiday.  Trading in other markets offered clues on the possible short-term fate for precious metals.  The $ ticked higher relative to its peers & the 10-year Treasury yield touched its lowest since Oct 2017.  Gold & other commodities priced in $s can be hurt by a firmer greenback, making them more expensive to users of other currencies, & vice versa.  And, lower yields on bonds can be beneficial to assets like gold by reducing the opportunity cost of holding nonyielding metals.  Meanwhile, “risk-on” stocks also tend to move inversely to haven gold. After a mixed start, stocks were modestly higher as gold futures settled & the major indices like the S&P 500 remained solidly higher for the year to date but have retreated in May as US-China trade tensions heated up.

Silver settles at fresh low for the year; gold drops in back-to-back sessions

Oil prices climbed, extending a Fri rebound following a long weekend for Memorial Day, with analysts weighing Fri data showing a drop in the number of rigs drilling for oil in the US & escalating US-Iran tensions.  West Texas Intermediate futures, the US oil-price benchmark, climbed 0.9% to $59.14 a barrel on the New York Mercantile Exchange.  Prices are down 11% from their Apr peaks but still up more than 30% in 2019.

Oil Extends Rebound as Oversupply Fears Ease

After a strong opening, stocks were sold for the rest of the day finishing near session lows.  Not encouraging as the summer season of trading begins.  Trade worries are not far from the minds of investors & the outlook is grim.  It looks like the next trade meeting will be with Trump & Xi Ping next month.  Until then (& maybe after) there is nothing for investors to look forward on the trade front.  The bulls have their work cut out to encourage buying from investors.

Dow Jones Industrials

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