Markets drop after report says Trump backs new tariffs on Chinese trade

Dow sank 137 (going below 26K), decliners over advancers 2-1 & NAZ dropped 21.  The MLP index lost 1+ to 281 & the REIT index fluctuated.  Junk bond funds inched higher & Treasuries rose in price.  Oil climbed to over 70 (more below) & gold pulled back 5 to 1206.

AMJ (Alerian MLP Index tracking fund)

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Although EU officials have said they are supportive of lowering tariffs on automobiles to zero if the US reciprocates, Pres Trump believes this is not a stand-alone issue or trade deal, according to a senior diplomatic official.  After months of back-&-forth, retaliatory tariffs between the US & the European bloc, Trump wants to see all tariffs removed on all industries, including agriculture, steel aluminum & medical equipment.  "We are willing to bring down even our car tariffs to zero, all tariffs to zero, if the U.S. does the same," European Trade Commissioner Cecilia Malmstrom told members of the European Parliament today.  But according to Politico, Malmstrom has said that agriculture would not be included in this deal, &, because of this, the White House is not celebrating the comments made today by Malmstrom.  US Ambassador to Germany Richard Grenell began a successful push in Germany to get their auto industry on board with lowering tariffs.  At the time, one of the outstanding questions was whether other major European auto players would join the call for zero tariffs.  But the Italians & the French are now supportive of lowering the tax.

Trump believes EU trade deal needs to go beyond zero tariffs on autos: Official

Canada's top trade negotiator says she's "encouraged" by urgent discussions that are intended to overhaul the North American Free Trade Agreement.  Leaving a morning session with US Trade Rep Robert Lighthizer, Foreign Affairs Minister Chrystia Freeland told reporters, "We continue to be encouraged by the constructive atmosphere that I think both countries are bringing to the table."  On Mon, the US & Mexico reached an agreement to replace NAFTA, a 24-year-old pact involving those 2 countries & Canada.  But the new deal excluded Canada.  Freeland hurried to DC to try to repair the damage.  She's seeking to forge a 3-country deal by tomorrow, starting a 90-day countdown that would let Mexican Pres Enrique Pena Nieto sign the pact before leaving office Dec 1.  "We're working very intensively," Freeland said.

Canadian envoy says she is 'encouraged' by NAFTA talks

Stocks accelerated losses in the PM following a report that Trump wants to move ahead with $200B in China tariffs.  Sources said that Trump  told aides he wants to move ahead with a plan to impose tariffs on $200B in Chinese imports as soon as the public-comment period concludes next week.  Meanwhile, roday Canadian & US officials were meeting to renegotiate a NAFTA deal, after the US & Mexico announced a preliminary trade deal between the 2 nations on Mon.  Tomorrow is seen as a deadline for the 3 countries to come to some agreement.  Earlier today Trump touted the strength of the stock market, tweeting that more good news is coming.  Yesterday, shares rose on unexpectedly robust economic news: The gov said that Q2 GDP was revised to 4.2% versus the initial 4.1% estimate.  Analysts had expected no change.  Tech-heavy NAZ & the broader S&P 500 index closed at record highs, for the 4th day in a row.

US stocks take a dive on Trump tariff threat against China

Campbell Soup (CPB) reported better-than-expected quarterly profit, but sales fell short of expectations.  The company also announced plans to shed 2 intl units & its fresh foods business.  Reported results versus the forecasts are shown:

• Adjusted EPS of 25¢ versus 24¢ expected
• Revenue of $2.22B versus $2.24B expected.

"Fiscal 2018 was a challenging year for Campbell," interim CEO Keith McLoughlin said.  "These results and our outlook for fiscal 2019 reinforce the need for the significant actions we announced this morning as part of our comprehensive, Board-led strategy and portfolio review. We believe these actions will put us on a path to create sustainable shareholder value."  McLoughlin stepped in after the company released what execs called "unacceptable" earnings in May & announced the departure of then-CEO Denise Morrison.  The company is unwinding her efforts to branch into healthier & more fresh foods to refocus on the product lines it knows well — snacks, meals & beverages.  CPB continues to face slowing, & in some segments declining, sales.  Its businesses like soup, V8 juices & SpaghettiOs remain out of sync with how today's young consumers eat.  Older consumers, too, are increasingly paying attention to the food they are eating.  In addition, cost pressures from rising shipping expenses & price-sensitive retailers are mounting.  The soup company last qtr lowered its expectations for this year's adjusted earnings before interest & tax, anticipating a drop of 9-11%.  Previously, it predicted a 5-7% fall.  The company's weak financial position has drawn attention from activist investors who are pressuring the 149-year-old soup maker to sell.  The stock fell 82¢.
If you would like to learn more about CPB, click on this link:
club.ino.com/trend/analysis/stock/CPB?a_aid=CD3289&a_bid=6ae5b6f7

Campbell Soup beats Wall Street earnings estimates, misses on revenue

Oil prices rose, extending gains on growing evidence of disruptions to crude supply from Iran & Venezuela & after a fall in US crude inventories.  Brent has risen by almost 10% over the past 2 weeks on widespread perceptions that the global oil market is tightening & could run short in the next few months as US sanctions restrict crude exports from Iran.  Benchmark Brent crude oil was up 56¢ a barrel at $77.70 & US light crude ended the session up 74¢ (1.1%) at $70.25, the highest closing price in 6 weeks.  Iranian crude exports will likely drop to just over 2M barrels per day (bpd) in Aug, versus a peak of 3.1M bpd in Apr, as importers bow to American pressure to cut orders.  OPEC, in which Iran is the 3rd-biggest producer, will discuss in Dec whether it can compensate for a sudden drop in Iranian supply after sanctions start in Nov, the head of Iraq's state oil marketer SOMO said on yesterday.  Crude exports from crisis-struck OPEC member Venezuela have also fallen sharply, halving in recent years to around 1M bpd.  Official US oil inventory data yesterday also helped the bullish trend.  US commercial crude inventories fell 2.6M barrels in the latest week, to 406M barrels, more than forecast, the Energy Information Administration said.  US production was flat from the previous week's record of 11M bpd.  The market pared gains slightly in morning trade after information provider Genscape said inventories at the delivery hub at Cushing, Oklahoma had risen 101K barrels since Aug 24.  The Intl Energy Agency (IEA) has warned of a tightening market towards the end of the year, due to a combination of falling supply in countries such as Iran & Venezuela, & strong demand especially in Asia.  "Definitely there are some worries that oil markets can tighten towards the end of this year," IEA Exec Director Fatih Birol said yesterday.

US crude rises 1.1% to 6-week high, settling at $70.25, on supply concerns

Nothing like the threat of higher tariffs, especially on Chinese trade, along with uncertainty on Canada trade to dampen a rise in the stock market.  For what it's worth Amazon (AMZN) finished above $2K.  Once again, this is supposed to be a quiet time in the stock market.  However plenty of excitement keeps coming from DC & tomorrow could be a busy day for the stock market.

Dow Jones Industrials

Lower markets after a 4 day rally

Dow lost 73, decliners over advancers 3-2 & NAZ slid back 8.  The MLP index dropped 1+ to 280 & the REIT index was steady in the 363s.  Junk bond funds rose & Treasuries were bid higher.  Oil crawled up pennies in the 69s & gold dropped 5 to 1205.

AMJ (Alerian MLP Index tracking fund)

CL=F

Crude Oil

69.70

+0.19

+0.3%

GC=F

Gold

1,203.20

-8.30

-0.7%

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US consumer spending increased solidly in Jul, pointing to strong economic growth early in Q3, while a measure of underlying inflation hit the Federal Reserve's 2% target for the 3rd time this year.  The Commerce Dept reported consumer spending, which accounts for more than 2/3 of US economic activity, rose 0.4% last month after advancing by the same margin in Jun.  Households spent more at restaurants & on accommodation last month.  There was also an increase in spending on prescription medication.  The forecast called for consumer spending rising 0.4% in Jul.  When adjusted for inflation, consumer spending gained 0.2% in Jul after rising 0.3% in Jun.  Strong consumer spending helped fire up economic growth in Q2, with GDP rising at a 4.2% annualized rate, almost double the 2.2% pace notched in Q1.  Solid consumer spending should blunt some of the impact on the economy from an anticipated widening in the trade deficit & weakness in the housing market in Q3.  Recent data showed a sharp rise in the goods trade deficit in Jul as well as further declines in home sales & a moderate rise in homebuilding last month.  Consumer spending, which grew at a 3.8% annualized rate in Q2 following a pedestrian 0.5% pace in Q1, is being supported by a robust labor market.  Spending on goods rose 0.2% last month after slipping 0.1% in Jun.  Outlays on services increased 0.4% after surging 0.6% in the prior month.  With demand rising last month, prices continued their gradual upward trend.  The personal consumption expenditures (PCE) price index excluding the volatile food & energy components rose 0.2% after edging up 0.1% in Jun.  That lifted the year-on-year increase in the core PCE price index to 2.0% from 1.9% in Jun.  The core PCE index is the Fed's preferred inflation measure.  It hit the central bank's 2% inflation target in Mar for the first time since Apr 2012.  Minutes of the Fed's Jul 31-Aug 1 meeting showed some policymakers worried "a prolonged period in which the economy operated beyond potential could give rise to inflationary pressures."  The Fed is expected to raise interest rates for the 3rd time this year in Sep.  In Jul, personal income rose 0.3%  after increasing 0.4% in the prior month.  Wages gained 0.4% & the saving rate slipped to 6.7% last month from 6.8% in Jun.

US consumer spending increases strongly; inflation rising

The shortage of qualified workers at construction firms is becoming more widespread, according to a new report, & the industry is raising pay as it desperately seeks to combat the epidemic.  80% of firms are having trouble finding hourly craft employees, according to a survey from Autodesk & the Associated General Contractors of America (AGC).  Additionally, 56% cannot find enough qualified applicants to fill salaried jobs, including project supervisors & managers.  The shortage has ballooned across all regions of the country, which has caused firms to increase pay & add other incentives in order to attract qualified personnel.  Over the past year, 62% of firms raised pay for hourly craft workers, while 56% did so for salaried employees.  More than ¼ added incentives or bonuses for hourly employees, while 34% did so for full-time employees.  Nearly one out of 4 firms improved benefit contributions or employee benefits for all employees.  Meanwhile, certain open jobs can net prospective applicants salaries in the 6 figures Opens a New Window. , as previously.  Some of those positions include welders, foremen & even some craft professionals, like instrument techs & crane operators.  Industry leaders are not confident the employment picture will turn around in the near future, with more than 80% of firms telling AGC it will continue to be hard to find hourly craft workers throughout the remainder of the year.  Industry leaders also expressed a lack of confidence in the skills among the pipeline of prospective workers, encouraging a greater focus on workforce development & education programs.  The industry is struggling to attract younger employees, as it seeks to combat perception challenges & changing workforce conditions.  The shortage is having an economic impact as the demand for construction grows.  Projects under way are taking longer to complete & costing more than anticipated, causing firms to factor these increased expenses into their bids.  As previously reported, the lack of workers in the construction industry is one factor leading to a serious lack of inventory in the housing market Opens a New Window. , which has caused costs to spike & has priced some first-time buyers out of the market completely.  As the labor market continues to tighten, the construction industry isn't the only sector plagued by a shortage of qualified applicants.  There is also a notable shortage of truck drivers Opens a New Window. , which is causing companies to raise wages for those employees as well.

Construction worker shortage: Top open jobs and what they pay

The number of Americans filing for unemployment benefits rose last week, but the underlying trend continued to point to a robust labor market that should keep the economy on a strong growth path this year.  Initial claims for state unemployment benefits increased 3K to a seasonally adjusted 213K for the latest week, the Labor Dept said.  Claims have now declined for 3 straight weeks.  The forecast called for claims rising to 214K.  The 4-week moving average of initial claims, considered a better measure of labor market trends as it irons out week-to-week volatility, fell 1K last week to 212K, the lowest level since 1969.  There are no signs so far in the claims data that the Trump administration's protectionist trade policy, which has led to an escalating trade war with China & import tariffs with other trading partners, including the EU, Canada & Mexico, is hurting the labor market.  The jobs market, which is viewed as being near or at full employment, is steadily raising wage growth, helping to support consumer spending & boost the overall economy.  The economy grew at a 4.2% annualized rate in Q2, the fastest pace in nearly 4 years & almost double the 2.2% rate notched in Q1.  The claims report also showed the number of people receiving benefits after an initial week of aid dropped 20K to 1.71M for the latest week.  The 4-week moving average of continuing claims fell 4K to 1.73M.  The continuing claims data covered the week of the household survey from which the Aug unemployment rate will be derived.  The 4-week average of continuing claims declined 15K between the Jul & Aug survey weeks, suggesting an improvement in the unemployment rate.  The jobless rate was at 3.9% in Jul.

US weekly jobless claims rise, labor market still tightening

Stocks are winding down, getting ready for a long weekend.  Still the Dow is up almost 300 already this week. returning to 26K+ territory.  Other popular averages have already reached new records.  Amazon (AMZN) is up 15, taking it over 2K.  The challenge for the bulls will be to extend this rally next week when serious trading resumes.  Continued strong economic data should be helpful.

Dow Jones Industrials