The Market Bull – May 2, 2019
The Major averages closed with small losses as the rumored trade settlement with China suffered yet another setback.
Productivity posted a 4th solid gain in the first quarter, handily beating expectations with a 3.6% advance. Unit labor costs fell .9%, while hours worked increased 0.5%. Some interesting highlights from the report include productivity growth averaging an anemic 1.3% over the last 5-years. The first quarter outsize gain was largely attributable to the partial government shutdown.
Factory orders beat expectations in March with a 1.9% gain on strength in durable goods and the proxy for business spending non-defense capital goods ex-aircraft that jumped 1.4%. This March figure was the best in 7-months for the series.
One of the primary benefits of free trade was dramatically increased trade flows and of course foreign direct investment or DFI. Two items that went along way to dramatically improving the standard of living for a large section of the global population, particularly in developing countries. In the post Great Financial Crisis or GFC period since 2009 DFI has plunged. Falling 27% last year and 16% in 2017 per data from the OECD or Organization for Economic Co-Operation and Development. In fact DFI has now fallen for 3 consecutive years to reach a level below the depths of the previous crisis in 2009.
At the previous peak in 2015 DFI flows totaled $1.92 trillion and represented around 2.5% of global GDP. DFI has since collapsed by 43%. The US traditionally the largest source of DFI actually saw a -$48 billion in Foreign Investment during 2018. Large declines in DFI was also seen in Europe, China and other locations as free trade gets replaced with protectionism jeopardizing asset prices globally particularly in vast over priced areas.
Standard and Poors 500 Index closed at: 2,917.52 Down 4.64
NASDAQ finished the day: 8,036.77 down 9.71