The Market Bull – June 4, 2019
Despite a rapidly escalating trade war, talk of imminent Fed rate cuts helped to spur the markets to substantial gains as nothing matters.
The ISM or Institute for Supply Management New York report plunged nearly 20 points in May to 48.6 signaling contraction. A nearly 2-year low for the series and the 3rd largest monthly decline ever recorded. While not overly significant in the grand scheme of things its dramatic reversal is worth noting. Given the recent sharp escalation in the trade war, substantial economic fallout isn’t far behind.
Factory Orders came in slightly better than expected in April despite a .8% decline on weakness in durable goods orders. The proxy for business spending non-defense capital goods ex-aircraft slipped 1%, snapping a string of 3 consecutive gains. Previous months were revised materially lower as this series has softened of late. The initial tariff on Mexican imports appears small compared with those imposed on others, including China. However, the U.S. imported $350 billion in goods from Mexico last year and the supply chains with the U.S. and Mexico are more intertwined than those between the U.S. and China. This would make the spillover effects on the U.S. economy more significant than the 5% tariff would otherwise suggest. That said with rising animosity between the US and China with respect to the trade war, expectations for a solution at the G-20 meeting later this month are receding and appear unlikely.
Standard and Poors 500 Index closed at: 2,803.27 up 58.52
NASDAQ finished the day: 7,527.12 up 194.10
Gold ended trading at: $1,330.20 up $2.30