Stocks make a mega comeback as rates remain flat

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Published Date 4/4/2018

US and global markets in turmoil over the trade conflicts developing over trade issues with China. President Trump announced trade tariffs on products worth $50B, China’s State Council announced today that it would levy penalties of the same rate on U.S. goods of a similar value. Trump coming down on 1,300 categories, China isn’t as broad, 106 types of U.S. goods, many of them high-profile. Soybeans and smaller commercial passenger planes, mostly made by Boeing Co. , are the most valuable U.S. exports to China, worth nearly $23 billion last year. All the focus now on the increasing moves between the US and China yet at each escalation both countries try to leave room to work toward finding a resolution. None of the trade tariffs are scheduled to begin for months, but in an otherwise bearish equity market, it doesn’t take a lot to add more negativity. Officials described China’s response as defensive and forced upon Beijing in hopes of compelling the U.S. into talks to ease the countries’ trade frictions.

Early this morning the DJIA was down 400 points in pre-open trading. The 10 yr note rate still not moving was down to 2.76% -3 bps from yesterday. As the session ground on the stock indexes gained momentum; there are great investments out there after the recent declines.

March ISM services sector index at 58.8 about as expected (59.0). Growth in new orders remains very strong, even though the index is now under 60, at 59.5, for the first time since December. A key positive, however, and one for the outlook on Friday's employment report is a 1.6 point rise in employment to 56.6 which is strong for this reading. Supplier deliveries lengthening very sharply, up 3.0 points to 58.5, and input prices up a half point to a very hot 61.5 for a third straight plus 60 showing. Overall it adds to the perceived strength of the economic growth.

March ADP private jobs stronger than forecasts, 241K jobs compared to 185K expected, what’s more, Feb jobs which were originally reported +235K were revised higher to 246K, we were looking for a revision lower. On Friday the BLS employment data; NFP jobs thought to be +175K from a whopping 313K in Feb, private jobs expected +175K from 287K in Feb. Average hourly earnings as important as jobs, maybe even a little more important with the Fed poised to increase rates and markets still believing wages will increase; average hourly earnings in Feb were up just 0.1%, March expected +0.3% and yr/yr +2.7% from 2.6% in Feb.

St. Louis Fed President James Bullard said he would like to see a pause in rate hikes. Mr. Bullard only has an alternate vote in 2018, but he will be an FOMC voter next year.

Tomorrow weekly claims, not as important lately, expected at 230K up from 215K the previous week. February US trade deficit expected -$56.7B about the same deficit we had in January.

Stock market intraday and interday volatility continued today; the DJIA had a trading range of over 760 points down about 500 in very early trade and closing up on the day. Looking for cheap stocks that have been tossed out with the bathwater and cooler heads that believe the present panic over trade is overdone.

Source: TBWS

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