Markets waver on hopes for US-China trade deal

Dow gained 39 after a choppy day of trading, advancers over decliners 4-3 & NAZ rose 46.  The MLP index lst 1 to the 257s & the REIT index added 2+ to the 281s.  Junk bond funds inched higher & Treasuries were sold.  Oil was flattish in the 62s & gold hardly budged at 1295 (more on both below).

AMJ (Alerian MLP Index tracking fund)

Free Apple Analysis!

Bring Your Portfolio Into The 21st Century

Four Days, Four Trades, +40% Average Returns
Learn to trade options with MarketClub!

China has acknowledged for the first time that the US has legitimate gripes about IP theft, forced technology transfer & cyber hacking, White House economic advisor Larry Kudlow said.  "They have for the first time acknowledged that we have a point. Several points," Kudlow said at an event hosted by The Christian Science Monitor.  Previously, he said, "they were in denial."  "And I think that has led to, you know, good negotiations," Kudlow added.  Kudlow said the acknowledgement came out of trade talks between China & the US.  He said even China's leader, Pres Xi Jinping, has signaled a willingness to listen to the US concerns at a dinner at the G20 summit in Argentina where he met with Pres Trump.  "President Xi wasn't saying, 'no we didn't, no we didn't, no we didn't.' He was open to listening. And at the lower levels, we heard that. And that's great progress."  Chinese smartphone maker Huawei did not come up during the talks.  Huawei is facing charges from the Dept of Justice over 2 cases alleging the theft of trade secrets & fraud.  "The Huawei stuff has generally not come up in the trade talks," Kudlow said.  "We looked at it as a legal matter so far."  Huawei claimed last month that the US law banning gov agencies from buying Huawei phones is unconstitutional.  US security experts fear the Chinese gov could use Huawei's devices to spy on US gov agents.  Huawei has previously denied it would hand its data over to the Chinese gov.

China admits for the first time that U.S. officials ‘have a point’ on IP theft

Oil futures ended modestly lower, snapping a 3-day winning streak after gov data showed an unexpectedly large rise in US crude inventories.  West Texas Intermediate crude for May delivery fell 12¢ to end at $62.46 a barrel.  The Energy Information Administration said US crude stocks rose 7.2M barrels last week.  Analysts had called for a fall of 100K barrels.  Oil has rallied sharply since the end of last year, with Saudi Arabia leading efforts by OPEC & its allies to curb output.  The US benchmark had ended at a nearly 5-month high & remains up around 3.7% for the week & more than 37% YTD.

Oil ends lower, snaps 3-day winning streak as crude inventories rise

Gold futures finished near unchanged levels as reported progress in negotiations between the US & China bolstered appetite for stocks & away from bullion, while the $ softened.  Gold for Jun delivery edged 10¢ lower to settle at $1295 an ounce.  The yellow metal drifted up after data from payment processor ADP's report showed private-sector payrolls rose by 129K in Mar, below average estimates for 165K jobs & under the Feb reading of 197K.  The data, which investors watch for clues to official jobs data due on Fri, appeared to weigh on the $.  The $ index was off 0.3%.  A weaker currency can provide a lift to commodities priced in the currency by making them cheaper to users of other currencies.  Meanwhile, gold bulls said that while global bond yields have bounced back this week, their decline so far this year as global central banks turn more dovish should help set a floor for precious metals.

Gold ends little changed as dollar weakens, with risk appetite buttressed by U.S.-China trade talk

Britain's huge services sector contracted in Mar for the first time since the immediate aftermath of the vote in June 2016 to leave the EU as firms put off new investments until the fog of Brexit has been lifted, a survey found.  Financial information company IHS Markit said the downturn in the sector, which accounts for around 4/5 of the British economy, reflected a lack of new work to replace completed projects, with many execs wanting Brexit clarity before making commitments.  It said Brexit concerns & worries about the economy also appeared to hold back household spending.  The firm's main services sector purchasing managers index, a gauge of economic activity, fell to 48.9 points in Mar from 51.3 the previous month.  Readings below 50 indicate a contraction in activity & it's the first time the index has fallen below that level since Jul 2016, when firms were dealing with the shock of the referendum result.  "Service sector order books have contracted at the steepest rate since the height of the global financial crisis in 2009 so far this year, with companies reporting that Brexit uncertainty has dampened demand and led to cancelled or deferred spending, exacerbating a headwind from slower global economic growth," said the firm.  According to the firm, the services sector joins construction in being in decline, with the wider economy held up only by the fact that manufacturing is booming because many firms have started stockpiling materials & other goods due to Brexit uncertainty.  Overall, IHS Markit said, the British economy flat-lined in Q1 & the protracted Brexit uncertainty risks weakening it further.  "A stalling of the economy in the first quarter will therefore likely turn into a downturn in the second quarter unless demand revives suddenly which, given the recent escalation of Brexit uncertainty, seems highly improbable," said the firm.

UK services sector shrinks as Brexit uncertainty hits orders

Stocks stumbled around for a 2nd day while waiting for news about the big trade deal.  The economic news continues to be weak, not really disappointing, but weak.  That has to be discouraging for the bulls.  The Dow was up nearly 100 at midday, then enthusiasm waned which brought in some selling.  However techs are strong with the NAZ approacing 8K, closing in on its record just above that level.  Hard to believe that mediocre economic data, the faltering trade negotiations & Brexit going nowhere are not bringing in more selling.

Dow Jones Industrials

Markets rise cautiously on US-China trade hopes

Dow went up 38, advancers ahead of decliners 2-1 & NAZ shot up 64.  The MLP index inched up in the 258s & the REIT index rose 2+ to the 381s.  Junk bond funds did little & Treasuries declined in price.  Oil was steady in the 62s & gold slid back 1 to 1288.

AMJ (Alerian MLP Index tracking fund)

CL=F

Crude Oil

62.70

+0.12

+0.2%

GC=F

Gold

1,288.10

-1.90

-0.2%

Start Using the Leverage of Options and the Power of MarketClub Today!

Four Days, Four Trades, +40% Average Returns
Learn to trade options with MarketClub!

Hiring in the US private sector grew by 129K jobs in Mar, according to the ADP National Employment report, missing expectations of 170K jobs.  It marked the slowest employment increase in 18 months, according to Ahu Yildirmaz, VP of the ADP Research Institute.  “Although some service sectors showed continued strength, we saw weakness in the goods producing sector," she said.  Stocks continued their premarket gains following the release of the report.  It's likely reflective of a weakening job market, Moody' Analytics chief economist Mark Zandi said, as employment gains slow across most industries & companies.  Although the goods-producing sector lost 6K jobs, the service-providing sector added 135K.  "If employment groth weakens much further," he said, "unemployment will begin to rise."  In Feb, the private sector added 183K jobs, slightly less than the anticipated 189K.  The results precede the release on Fri by the Labor Dept of the highly anticipated jobs report, which will provide further insight into whether the nation's economy is slowing.  The US economy is expected to have added 180K jobs, on the heels of a measly month for job creation.  In Feb, the public sector added a disappointing 20K jobs.

Private sector hiring in March misses Wall Street's expectations

Even before the bond yield invested & the Federal Reserve sounded a cautious note for the year ahead, some of North America's top finance execs stressed the increasing likelihood of an economic downturn in the US.  According to a new study by Deloitte, nearly ¾ of CFOs said they expect a deceleration of economic activity by the end of 2020; however, of those surveyed, only 15% anticipated an outright recession.  That’s largely because the US-China trade war, the length of business & credit  cycles & slowing growth in China & Europe.  The CFOs also cited concerns about rising interest rates, although the Fed has signaled it likely won't raise the benchmark federal funds rate for the remainder of 2019, declining consumer confidence & political concerns.  Despite the high number of execs who believe a downturn is coming, less than ½ said they have a defensive plan in place.  About 39% of CFOs said their company had a detailed plan for a downturn, while 28% said they have already begun to take defensive steps.  “Prior to 2017, CFOs’ top external risks focused heavily on slow economic growth,” the study said.   “As global economic performance improved, CFOs’ top worries shifted toward threats to continued growth -- especially trade policy/tariffs and political turmoil.”  Of the 151 respondents, 58 CFOs said they were most worried by the current US trade policy, in addition to tariffs.  Following that were 31 CFOs, who said they were most worried about an economic risk & slowdown.  The sentiment has been echoed by other studies, including a survey published in Jan by the Conference Board that found CEOs view a recession as their biggest external concern for 2019.  Comparatively, in 2018, CEOs ranked the threat of a recession an afterthought, ranking it as their 19th most vital concern.

CFOs believe economic slowdown coming to US - and soon

Growth in the US services sector fell more than expected & reached its slowest pace in more than a year, according to data from the Institute for Supply Management (ISM).  The ISM non-manufacturing index fell to 56.1 in Mar, the weakest print since Aug 2017, down from 59.7 in Feb.  The index was expected to dip to 58.  "The non-manufacturing sector's growth cooled off in March after strong growth in February," said Anthony Nieves, chair of the ISM.  "Respondents remain mostly optimistic about overall business conditions and the economy. They still have underlying concerns about employment resources and capacity constraints."  New orders, a key component of the overall index, fell by 6.2 points last month to 59.  Meanwhile, prices increased by 4.3 points to 58.7.  Stocks pared their initial gains on the ISM data, with the Dow briefly dipping into negative territory.  The ISM report also follows weaker-than-expected jobs data released earlier in the day.  Private payrolls increased by 129K last month, well below the expected print of 173K, according to ADP & Moody's Analytics.  The private payrolls report is used by investors as a preview to the monthly US jobs report.

Services sector growth falls to slowest pace since August 2017

Leakers are saying a final US-China trade deal is near.  But it's not complete yet.  Nothing to do but await developments.  Meanwhile economic data is not impressive & more of these kind of results can be expected.  As an aside, REITs have been having an excellent year with the index (above) at new records.  Even though this is not an exciting area for investors, yields are attractive.

Dow Jones Industrials

Markets edge lower, digesting recent gains

Dow fell 79, decliners a little ahead of advancers & NAZ gained 19.  The MLP index rose fractionally to the 258s & the REIT index was about even in the 379s (in record territory).  Junk bond funds inched higher & Treasuries remained higher.  Oil was up 1+ to the 62s (highest since Nov) & gold rose 1 to 1295.

AMJ (Alerian MLP Index tracking fund)

Free Apple Analysis!

Bring Your Portfolio Into The 21st Century

Four Days, Four Trades, +40% Average Returns
Learn to trade options with MarketClub!

The global economy is in "a delicate moment," said IMF's managing director Christine Lagarde.  "The growth is losing the momentum that we had hoped for pretty much across the globe. We have 70 percent of the economy that is slowing down," Lagarde said at the 13th Annual Capital Markets Summit.  "The U.S. is not immune to the deceleration anymore."  Lagarde noted there are clear downside risks including Brexit & China trade tensions that have affected business confidence.  The markets have been sensitive to global economic data.  Stocks posted a strong rally yesterday on strong manufacturing data out of the US & China after taking a hit from weak retail sales & durable goods numbers in Mar.  Adding to the market volatility has been the news coming from the negotiations of a trade deal between China & the US.  "I'm still optimistic [about a trade deal] and there are clear impetus for both sides to move forward. It's vitally important," Lagarde said.  She added based on IMF research, if a 25% tariff increase was imposed, it would lead to 0.6% loss on US economic growth & 1.5% loss on the Chinese economy.  "Given that those are the two big giants currently, if you have that kind of negative impact on both, it would weigh heavily on the global economy and it would be bad," Lagarde said.

Lagarde: Global economy is in ‘a delicate moment’ and ‘losing momentum’

Major automakers reported weak sales for Mar & the Q1 citing a rough start to the year, but said a robust economy & strong labor market should encourage consumers to buy more vehicles as 2019 rolls on.  Passenger car sales suffered throughout Q1 versus the same period in 2018 as Americans continued to abandon them in favor or larger, more comfortable &, for automakers, far more profitable pickup trucks & SUVs.  The battle for market share in the particularly lucrative large pickup truck market intensified in the qtr, as Fiat Chrysler (FCAU) Ram brand outsold #1 US automaker General Motors (GM) Chevrolet brand trucks.  The 2 automakers have both launched redesigned pickup trucks.  For decades Ford (F) has had the single best-selling truck brand in its F-Series trucks, with the Chevy brand a solid #2 & Ram a distant 3rd.  Overall, US new vehicle sales are expected to decline in 2019 after a long bull run since the end of the recession 10 years ago, led by falling passenger car sales. Competition in the high-margin SUV market is also intensifying.  GM posted a 7% drop Q1 sales, with declines across all brands.  Sales of the Silverado pickup trucks fell nearly 16% & the high-margin Chevy Suburban large SUV dropped 25%.  FCAU reported a 7% fall in US sales in Mar & a 3% drop for the qtr.  All of FCAU's brands dropped in Mar, except for Ram, which saw a 15% increase in pickup truck sales.  “The industry had a tough first quarter but with spring finally starting to show its face and continued strong economic indicators... we are confident that new vehicle sales demand will strengthen going forward,”  FCA’s US head of sales Reid Bigland said.  Toyota (TM) reported a 3.5% fall in US sales in Mar & 5% for Q1, hurt by declining demand for its Corolla sedans & Camry vehicles.  “While some of our competitors are abandoning sedans, we remain optimistic about the future of the segment,” Toyota said.  Nissan Motor posted a 5.3% drop in sales in Mar & its Q1 sales were down 11.6%.  Industry consultants JD Power & LMC Automotive have predicted a 2.1% drop in US auto sales in Mar, partly due to bad weather, mixed economic data & lower tax refunds.

U.S. March, first-quarter auto sales drop

When the US escalated the trade war by slapping tariffs on $200B in Chinese goods last Sep, China's economy was struggling & its stock market was in a deep slide, giving the US a seeming advantage in a trans-Pacific trade rift.  But months later, the US has lost some of that edge.  China's Shanghai stock market has surged more than 27% in 2019 & the best performer of major markets globally, while China's economy is finally showing early signs of stabilizing.  When the Sep tariffs were announced, Pres Trump was seen as emboldened by the best 2 qtrs of more than 3% US growth in years & a stock market that was hitting all-time highs.  While the US is still seen as having an advantage, economic growth has faltered, to a below trend 1.5% pace in Q1.  The US stock market is also trying to recapture those 2018 highs, despite strong gains after Dec's sharp selloff.  Trade friction & tariffs have put a dent in both economies, & show up in record trade deficits between the US & China.  But China's wobbling economy may be perking up.  Manufacturing data this week showed that activity was expanding again.  Strategists say the role of the stock market has become an important factor in trade negotiations, after the 14% dive in the S&P 500 in Q4 & the 25% decline in Shanghai stocks for all of 2018.  The US stock market bottomed in the final week of Dec & shortly after Trump announced progress in talks with Beijing.  Shanghai & US stocks have both moved mostly higher since then & the 2 sides have stayed at the negotiating table.

China’s stock market is up 27% this year, giving it new leverage in trade talks

The White House is looking for ways to limit the economic damage that will result if Pres Trump makes good on his recent threats to close the US-Mexico border, according to Larry Kudlow, the Director of the National Economic Council.  Kudlow said that the Trump administration was exploring whether it could permit trucks carrying freight to cross the border if it is sealed.  He cautioned that the pres has not made any final decisions.  "We are watching it and looking for ways to allow the freight passage, some people call it truck roads, and there are ways you can do that which would ameliorate the breakdown in supply chains," Kudlow said.  Kudlow supports Trump's immigration policies "fully."  "The question is: Can we deal with that, and not have economic damage? And I think the answer is: We can, and people are looking at different options."  "Particularly if you can keep those freight lanes, truck lanes, open, that's probably the nub of it," Kudlow added.  Kudlow said that allowing workers to cross the border could be more difficult.  "I don't want to comment on it because we are playing right now — what you want to do is stop the emergency and the breakdown, and you want to try to limit whatever harm that does," he said.  "It's a very difficult task. I think it's doable."  Trump, who has declared the border situation a national emergency, threatened Fri to shut down "the Border, or large sections of the Border," if Mexico does not "immediately stop ALL illegal immigration coming into the United States throug (sic) our Southern Border."

White House looking to keep truck lanes open if Trump closes U.S.-Mexico border, K…

Traders are waiting for news, but little was announced today.  Stocks digested recent gains & tomorrow should bring more activity with Mar economic reports.

Dow Jones Industrials