The Market Bull – May 9, 2019
With geopolitical tensions rising rapidly along with heat and rhetoric related to the trade war the major averages tanked again in early trade and closed with large losses. With the Chinese walking away from the negotiating table tariffs are all but certain to hit 25% tomorrow and expanded to include almost all Chinese imports into the US. Ultimately the US consumer will bear the brunt of these tariffs through higher prices. I don’t care what Trump or the lamestream media says, it’s basic math, the Chinese sure as hell aren’t going to pay them on our behalf out of the kindness of their hearts.
The April Producer Price Index or PPI advanced .2% as expected. On a year ago basis the PPI is up 2.3%, slightly higher than last month, but still fairly low by historical standards. As has been the pattern for some time now energy prices remain the primary driver of increasing costs.
The international trade deficit increased slightly in March to 50 billion dollars. Exports increased 1% to 212 billion, imports advanced 1.1% to 162 billion. The petroleum deficit remained near zero for a 5th consecutive month at -1.8 billion. While trade remains strong for now a more than doubling of tariffs on Chinese goods to 25% set to take effect tomorrow, and all but guaranteed Chinese retaliation will most likely put a real crimp in trade going forward. In fact exports to China have fallen 18% over the first quarter from the same period in 2018, while imports from China have fallen 14%. It would appear that Friday will usher in the beginning of the modern protectionist period in global trade. Something that will almost certainly put a chill into economic growth internationally going forward.
Wholesale inventories fell for the first time in 11 months during March slipping .1% on a large decline in non-durable goods. Sales jumped 2.3% on surging demand for non-durable goods, pushing the inventory to sales ratio down to 1.32 months, a 4-month low.
Standard and Poors 500 Index closed at: 2,879.42 down 4.63
NASDAQ finished the day: 7,943.32 down 20.44
Gold ended trading at: $1,282.20 down $3.40