A Spanner in the Works!

A spanner in the works!  Stocks fell on Friday in response to the Administration’s announcement that the US will levy a 10% tariff on Mexican imports.  A new front in the trade war took investors by surprise causing a selloff in equities.




  1. The trade war is growing! WHILE YOU SLEPT, the President announced via twitter that the US was removing India’s developing nation designation making it ineligible to ship roughly 2000 items to the USA duty free.  In other words, India will now pay tariffs!  It may not be a surprise to some investors as the idea of removing the designation has been discussed in the past.  The timing of the decision may make some uneasy given the recent breakdown in talks with China.  Thursday night’s Presidential Tweet announcing the 10% tariff on Mexican imports sent shudders through the markets, which were not expecting a new front in the Administrations trade war.  The tariff would impact all of the roughly $350 billion imports, namely the auto industry.  Analysts estimate that 1/3 of North American auto capacity comes from Mexico.  The S&P automobile index fell by -3.83% on Friday as investors began to plan for the rough ride.


  1. The economy… seems to be OK. The GDP is growing by +3.1 annualized according to the latest estimate released on Thursday and inflation is under control, below the Fed’s target, according to the Core PCE Deflator released Friday which showed an annualized growth of +1.6%.  All of the Fed speakers seem to be happy with the economy with the latest praise coming from San Francisco Fed Chief Mary Daly, who said that the economy is in a “really good place” underscoring the reasoning for patience.  Friday also featured a University of Michigan Sentiment indicator which came in at 100.0, down from last month’s 102.4 and while it doesn’t seem like much it is important to take heed of the consumers which are the root cause of economic slowdown.  If they lose confidence, economic deceleration is soon to follow.




The stock market headed south of the border on Friday largely in response to the newly tweeted trade tariffs on Mexico.  The S&P500 closed down by -1.32%, the Dow Jones Industrial Index fell by -1.41%, the Russell 2000 sold off by -1.35%, and the NASDAQ 100 dropped by -1.62%.  All of the equity indices closed below their 200 day simple moving averages which is a negative indicator.  Fears of a global economic slowdown impacted crude oil as well.  WTI Crude fell by -5.46% on Friday closing at 53.50 and topping off a month which saw crude lose -16.29%.  Bonds traded up on Friday and ten-year treasury yields fell by -9 basis points to 2.12%.  The 3-month / 10-year yield curve fell further into inverted territory closing at -21 basis points making it the 7th close underwater.  The sharp drop in bond yields made interest-bearing bond proxies look more attractive to investors and the Utilities and Real Estate Sectors climbed by +0.44% and +0.77% respectively.




– Markit Manufacturing PMI is expected to come in at 50.6, same as last month’s read.  The ISM Manufacturing PMI is expected to be 53.0, up slightly from last month’s 52.8.

– The Census Bureau will announce April Construction Spending which is expected to have risen by +0.4% compared to the prior month’s -0.9% drop.

– Fed Governor Randal Quarles, Richmond Fed President Thomas Barkin, and St. Louis Fed Head James Bullard will all speak today.

– Later in the week we will get Factory Orders, final Durable Goods Orders for April, Services PMI, the Fed Beige Book, and the Monthly Employment Situation from The Bureau of Labor Statistics. Please refer to the attached weekly economic and Earnings calendar for details.

daily chartbook 2019-06-03

earnings releases 6_03

econ numbers 6_03


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