Thursday, May 9, 2019

Markets pare losses after Trump says trade deal still possible

Dow finished down 138 (well off earlier lows), decliners over advancers 4-3 & NAZ fell 32.  The MLP index lost 3+ to the 242s & the REIT index added 1+ to the 375s.  Junk bond funds were little changed & Treasuries remained strong.  Oil slid back to the 61s & gold went up 3 to 1285 (off session highs).

AMJ (Alerian MLP Index tracking fund)

Live 24 hours gold chart [Kitco Inc.]

3 Stocks You Should Own Right Now - Click Here!

Pres Trump said that tariffs are an "excellent" alternative to a trade deal with China, hours before Chinese officials were set to meet US trade negotiators later in DC.  Negotiators for the US & China will meet at 5PM ET, Trump said.  He had set a midnight deadline to slap additional tariffs on China, though he has suggested that his administration might reverse its decision depending on progress in the negotiations.  "They'll see what they can do," Trump said at a White House event.  "But our alternative is an excellent one."  "It's an alternative I've spoken about for years. We'll take in well over a hundred billion dollars a year. We never took in 10 cents from China," Trump said, referring to additional tariffs he promised to impose.  Trump struck a more optimistic tone when asked if he would speak with Chinese Pres Xi Jinping.  "Well, he just wrote me a beautiful letter, I just received it, and I'll probably speak to him by phone," Trump said.  The pres said Xi's letter expressed a desire to come to an agreement.  "Let's work together, let's get something done," Trump added, when describing the letter.  After Trump's comments at the White House, stock indices recovered from ground lost stemming from worries stirred up by his comment yesterday that China "broke the deal."  "And I think it'll be a very strong day, frankly. But we'll see.

Trump says deal with China is still possible, but tariffs are an ‘excellent’ alternative

China's top trade negotiator, Liu He, will meet with Pres Trump's trade team without the title "special envoy" for Pres Xi Jinping, a role he has held in previous talks, suggesting the vice premier may have diminished authority to make concessions that could be key to striking a deal.  A Chinese source said that Liu's demotion suggests that he may not have much leeway to make compromises on his own.  That could leave negotiations to happen at a higher level.  This PM, Trump said that Xi had written him a "beautiful letter" that he had "just received," & said he will probably speak to Xi by phone.  The news of Liu's title change comes as DC & Beijing wrestle over the contours of a trade deal that has faced a number of setbacks in recent days.  Trump over the weekend set a Fri deadline to more than double the rate for existing tariffs on $200B in Chinese goods, a turnaround after weeks in which the administration signaled that negotiations were moving forward.

China’s top negotiator may have diminished role in trade talks ahead of dinner with US officials

US producer prices rose moderately in Apr, but underlying inflation pressures at the factory gate appeared to be picking up.  The Labor Dept said its producer price index (PPI) for final demand increased 0.2% last month after jumping 0.6% in Mar.  In the 12 months thru Apr, the PPI increased 2.2%, matching the Mar rise.  The forecast called for the PPI gaining 0.2% in Apr & increasing 2.3% on a year-on-year basis.  A key gauge of underlying producer price pressures that excludes food, energy & trade services increased 0.4% last month.  That was the largest rise since Jan 2018 after being unchanged in Mar.  The core PPI increased 2.2% in the 12 months thru Apr after rising 2.0% in Mar.  Price pressures have remained moderate despite a strong economy & tightening labor market.  The Federal Reserve's preferred inflation measure, the core personal consumption expenditures (PCE) price index increased 1.6% in the year to Mar, the smallest gain in 14 months, from 1.7% in Feb.  The central bank last week kept interest rates unchanged & signaled little desire to adjust monetary policy anytime soon. Fed Chairman Jerome Powell said inflation had been "somewhat weaker," but believed the softer readings "may wind up being transient."  Last month, wholesale energy prices rose 1.8% after jumping 5.6% in Mar.  Goods prices increased 0.3% last month after surging 1.0% in Mar.  Wholesale food prices fell 0.2% in Apr & core goods prices were unchanged after rising 0.2% in Mar.  The cost of services edged up 0.1 % in Apr after increasing 0.3% in the prior month.  Prices for health-care services increased 0.3% last month.  Those healthcare costs feed into the core PCE price index.

US producer prices rose moderately in April

The number of people who applied for jobless benefits in early May fell slightly to 228K, showing little change in one of the strongest labor markets in decades.  Initial jobless claims fell 2K from a seasonally adjusted 230K in the prior week, the gov said.  The forecast called for new claims to total 218K last week.  The more stable monthly average of new claims rose 7K to 220K.  The 4-week average gives a more accurate read into labor-market conditions than the more volatile weekly number.  The number of people already collecting unemployment benefits, known as continuing claims, increased 12K to 1.68M.  New claims spiked in late Apr after touching a 50-year low 193K earlier in the month, largely because a late Easter holiday distorted attempts to adjust for seasonal variations.  Claims without seasonal adjustment, the actual number of people who filed, indicate that layoffs may have increased in the past month.  Raw claims have been higher in the past 2 weeks compared to a year earlier.  A vibrant labor market is keeping the economy on track to break the record for longest expansion ever in a few months.  The rate of unemployment fell last month to a nearly 50-year low of 3.6% & job openings are back near a record high.  Even after a recent increase in new jobless claims, the pace of layoffs is still near the lowest level since the late 1960s.

Jobless claims dip to 228,000 in early May

US crude-oil prices declined, while global benchmark prices ended a few pennies higher, with escalation in the Sino-American trade spat raising the potential to dent energy demand.  Those concerns have more than offset the price-supportive weekly decline in US crude inventories reported yesterday, though traders continue to keep watch on growing tensions between the US & Iran, which raises the threat of disruptions to Middle East output.  West Texas Intermediate crude for Jun delivery fell 42¢ (0.7%) to settle at $61.70 a barrel after a 1.2% rise a day earlier.  Prices were on track for a weekly loss of 0.4%.  Global benchmark Jul Brent crude added 2 pennies to end at $70.39 a barrel & the contract was headed for a weekly decline of about 0.6%.

U.S. oil prices settle lower as hopes for a U.S.-China trade deal fade

The Dow finished 300 above the early lows.  While the trade talks are going on, chances are the midnight deadline for new tariffs will be delayed.  But the time frame would probably measured in a few days.  Since nobody knows what will happen at the end of trade talks, all investors can do watch developments.  A slightly encouraging sign is that safe haven gold & Treasuries traded a little lower in the PM.  But these times remain very tense.

Dow Jones Industrials

No comments: