Friday, May 24, 2019

Markets rebound ahead of holiday weekend

Dow rose 55, advancers ahead of decliner about 5-2 & NAZ gained 25.  The MLP index was fractionally lower to 250 & the REIT index rose 1+ to the 385s (record high territory).  Junk bond funds fluctuated & Treasuries were sold after yesterday's rally.  Oil inched higher to the 58s following significant selling yesterday & gold was off  2 to 1283.

AMJ (Alerian MLP Index tracking fund)

CL=FCrude Oil58.15

GC=FGold   1,281.20
 -4.20 -0.3%

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Stocks got a lift today following what has been a volatile week.  The Dow, the S&P 500 & NAZ all opened higher after 2 days of falls ahead of the Memorial Day weekend.  US financial markets are closed on Mon.  But China trade worries & concerns about global growth have the major stock averages all lower for the week & unless there is a more significant rally today the Dow will end the week down 5 weeks in a row.  That would be the longest losing streak in almost 9 years.  The S&P 500 & NAZ may end down for a 3rd straight week, which hasn’t happened since Dec 21.  Fears over a prolonged trade war have calmed a little since Pres Trump said he plans to meet with China's Xi Jinping at a summit next month in Japan & also after he suggested overnight that Chinese technology company Huawei may be included in any final trade deal.  Earlier this week the White House announced plans to ban the company's technology in the US.  In the UK, as expected, British Prime Minister Theresa May said she plans to resign as of Jun 7.  Investors appear to hope May's pending resignation could unblock the political stalemate over Brexit.   While some analysts are warning it could simply mean another delay to the EU departure.  In economic news, orders to US factories for large manufactured goods fell sharply last month, pulled down by lower demand for commercial aircraft & cars.  The Commerce Dept said that orders for durable goods, items meant to last at least 3 years, fell 2.1% after rising 1.7% in Mar.  Orders also fell steeply in Feb.  Aircraft orders, typically a volatile category, plummeted 25.1%, after a more modest gain of 7.8% in the previous month.  Orders for cars & auto parts fell 3.4%, the biggest drop in nearly a year.  And a category that tracks business investment declined 0.9%, the most since Dec.  The data suggest companies are spending less on big-ticket items, likely in part because of the uncertainties raised by the US-China trade war.  Recent declines in US stocks have sent more money into the bond market.  The yield on the 10-year Treasury dropped to 2.31%, the lowest level in more than a year.  In turn, US mortgage rates are falling.  A 30-year fixed rate mortgage is now hovering around 4.09%, as tracked by Freddie Mac.  Overnight European stocks rebounded, while markets in Asia were mixed.  Japan's benchmark Nikkei 225 fell 0.2% to finish at 21,117.   Australia's S&P/ASX 200 lost 0.6% at 6456.  South Korea's Kospi dropped 0.7% to 2045.

Stocks rebound to end volatile week

Stepping up Beijing's propaganda offensive in the tariffs standoff with DC, Chinese state media accused the US of seeking to “colonize global business” with moves against Huawei & other Chinese technology companies.  There was no word from either side on progress toward resuming talks between the 2 large economies, though Pres Trump said he expected to meet with his Chinese counterpart, Xi Jinping, next month at a G-20 meeting in Japan.  Negotiations over how to cut the huge, longstanding US trade deficit with China & resolve complaints over Beijing's methods for acquiring advanced foreign technologies foundered earlier this month after Trump raised tariffs on Bs of $s of imports from China.  At a daily briefing, foreign ministry spokesman Lu Kang accused American politicians he didn't name of “fabricating various lies based on subjective presumptions and trying to mislead the American people.”  The China Daily said US expressions of concerns about Chinese surveillance equipment maker Hikvision were for the self-serving aim of claiming the “moral high ground” to promote DC' s political agenda.  “In this way, it is hoping to achieve the colonization of the global business world,” the newspaper said.  Hikvision said that it takes US concerns about its business seriously & is working to ensure it complies with human rights standards.  Activists have been urging the US & other countries to sanction China over repression of members of Muslim minority ethnic groups in the northwestern Xinjiang region, where an estimated 1M are being detained in re-education camps.  In its statement, the company said it had “engaged with the U.S. government regarding all of this since last October.”  Hikvision said it had retained former US Ambassador-at-large Pierre-Richard Prosper of the firm Arent Fox to advise the company regarding human rights compliance.

China accuses U.S. of trying to ‘colonize global business’

Orders for durable or long-lasting goods tumbled in Apr because of falling demand for Boeing jets & new cars & trucks, but even more worrisome, business investment continued to weaken in the face of a tense trade standoff with China & a slower US economy.  Orders for durable goods, products meant to last at least 3 years, dropped 2.1% in Apr, the gov said.  The increase in orders in Mar was also marked down.  The forecast called for a 2.4% decline in new orders.  When cars & planes are stripped out, orders were flat.  Transportation often exaggerates the ups & downs in orders because of lumpy demand from one month to the next.  A key measure of business investment known as core capital-goods orders also declined. Investment fell 0.9%, the first tumble in 4 months. These orders strip out aircraft & defense spending to get a better idea of how much the private sector is investing.  The yearly pace of business investment slowed in Apr to 1.3% from 3.8%, marking the smallest 12-month increase since the final month of Obama's presidency in 2017.  The manufacturing side of the US economy began to slacken toward the end of last year, a slowdown exacerbated by the trade war with China.  A still-weak global economy is another drag.  Businesses are unlikely to sharply ratchet up spending & investment until the US-China spat is resolved & the global economy strengthens.  The good news is, manufacturers are still expanding, even if at a snail's pace, & most are unwilling to reduce their workforces amid a widespread shortage of skilled labor.  So long as the vast majority of Americans keep working and mass layoffs are avoided the economy is unlikely to stumble.

Durable-goods orders slump in April as business investment almost dries up

The Mexican economy contracted in Q1 from the end of last year, a challenge for the 6-month-old gov of Pres Andrés Manuel López Obrador, who said he expects growth to average 4% during his 6-year term.  Industrial production remained sluggish & services declined from the end of last year.  GDP, a measure of output in goods & services, fell 0.2% in seasonally adjusted terms from Q4-2018, the National Statistics Institute said.

Mexican Economy Contracts, Testing New Government

The Dow has seen a lot of selling in recent weeks & this week looks like it add to the negative streak.  Already the index is down more than 100 from its opening today.  The trade front looks to be gloomy with no end in sight.  Volume will be low today, with many traders away, starting their holiday early.  Chances buyers will not return in force next week.

Dow Jones Industrials

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