Registered Investment Adviser Caleb Lawrence
The major averages enter the final hour with large gains on generally positive but not overly significant data. 1st quarter productivity missed expectations with a gain of .4%, unit labor costs jumped 2.9% over the same period. On a year ago basis both productivity and unit labor costs gained 1.3%, as wages continue to trail inflation.
Despite all the trade war rhetoric and tit for tat tariffs applied so far. Trade is holding up quite well with exports advancing .5 billion in April to 211.2 billion. Imports slipped .5 billion to 257.4 billion, pushing the trade deficit to a 7-month low of 46.2 billion. With the first round of tariffs set to hit the trade tape with the June data, anecdotal and historical experience shows a lose-lose environment so far.
The Mortgage Bankers Association or MBA reports that mortgage activity advanced 4.1% last week with purchase apps up 4.2% and refis gaining 3.8%. That said the downward trend remains intact. The 30-year contract rate for a Jumbo Loan fell again hitting 4.7%.
Corporate share buy backs continue to provide support for grossly overvalued and overleveraged markets. May saw the announcement of an all-time record 173.6 billion in announced buy backs. The top 5 companies include Apple: $100 billion, Micron: $10 billion, Qualcomm: $8.8 billion, Adobe: $8 billion, and T-Mobile: $7.5 billion. Buy backs have been running at very high levels since 2012 and the current 173.6 billion beats the previous record of 162 billion set in the first quarter of 2016 and nearly matches the 2018 1st quarter total of 178 billion, that interestingly saw the major averages finish about even for the quarter. Another example of late stage bubble dynamics that feature more debt, more stimulus, and more buy backs for less and less positive benefit.