Friday, May 10, 2019

Markets rebound after Trump says talks will continue

Dow finished 113 higher (up more 350 from midday lows), advancers over decliners 3-2 & NAZ added 6.  The MLP index jumped a very big 9 to the 251s & the REIT index rose 4+ to 380.  Junk bond funds slid back & Treasuries edged slightly higher in price.  Oil was up pennies in the 61s & gold crawled up 1 to 1286.

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US trade talks with China ended today as Liu He, the top Chinese trade negotiator, left the Office of the US Trade Representative.  "They were constructive discussions between both parties, that's all we're going to say. Thank you," Treasury Secretary Steve Mnuchin said after Liu's departure.  Both Mnuchin & Trade Representative Robert Lighthizer shook hands with Liu, who is China's vice premier, as he left the office in DC.  The administration officials were seen entering the White House after the 2 days of US-China talks ended.  The world's 2 largest economies engaged in negotiations yesterday & today as they tried to salvage a trade deal that appeared to be within their grasp only a week ago.  The US increased tariffs on $200B in Chinese goods to 25% from 10% today following what it called China's decision to back out of key commitments to a developing agreement.  China has promised to retaliate against the tariffs, but it is unclear what action Beijing would take.  It is unclear when DC & Beijing will start talks about a trade deal again.  Trump could put even more pressure on China to agree to terms.  The pres has threatened to put 25% tariffs on the $325B in Chinese goods that remain untaxed.  Investors see the potential for the US & China to reach a deal before the tariffs start hitting companies' bottom lines.  The duties do not apply to goods shipped before May 10.  That creates a possible period of up to a few weeks for the sides to possibly avoid escalation.

Treasury Secretary Mnuchin says China trade talks are done for the day

Solid growth in individual income tax receipts was swamped by a big rise in spending, as the federal surplus for the month of Apr fell 25% from year-earlier levels.  The Treasury Dept said it recorded a surplus of $160.3B in Apr, as receipts rose 5% while spending jumped 27%, mostly on the timing shift of having one more business day.  The US typically reports a surplus in Apr as Americans file their taxes with the IRS.  Excluding that calendar shift, spending still would have climbed 10% on big increases in defense, health & interest payments.  Individual income & withheld taxes rose 10% & corp income taxes rose 6%.  The gains on the individual side come on the impact of growing employment, wages & hours worked.  Remittances from the Federal Reserve fell 23%.  Tariffs & other customs leapt $2B (59%) on the impact of Chinese & steel & aluminum tariffs.  Thru Apr 2019, the fiscal-year deficit totaled $531B compared to $385B.  Even accounting for various calendar effects, the deficit still has widened by 23% as spending has outpaced a modest 2% increase in revenue.  Growing deficits still have not rattled the bond market, with the benchmark 10-year Treasury yielding 2.46% at today's close.

U.S. budget surplus for April narrows 25% on spending increases

Federal Reserve Bank of New York Pres John Williams said today the outlook for the US economy remains bright & central-bank interest-rate policy is in the right place to ensure it stays that way.  “The economy remains on a path of healthy growth, with a very strong labor market and without the emergence of inflationary pressures,” Williams said in a speech.

Interest-Rate Policy in Right Place to Ensure Continued Expansion, Says New York Fed President

Pres Trump said there wasn't a need to “rush” trade talks with China, after a midnight deadline passed & tariffs increased on $200B in Chinese imports.  After increased tariffs took effect early today, Trump said talks between the US & China were continuing “in a very congenial manner — there is absolutely no need to rush.”

Mnuchin said trade talks were "constructive."  Investors are hoping Trump won't let the market collapse.  These are the thoughts that brought back buyers in the PM.  However the talks remain "iffy."  For the week, the Dow finished down 600 & the NAZ fell a very big 250.  The trade still needs a lot of work & that could take time.

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