Major benchmarks around the globe are all lower this morning with U.S. and China trade tensions front and center. The S&P 500 traded to a low of 2765.50 on Friday after the White House announced 25% tariffs on $50 billion of Chinese goods. However, only $34 billion of which will be imposed on July 6.
Fundamentals: The Federal Reserve hiked interest rates by a quarter point yesterday and signaled that two more hikes are on the way this year. The Fed’s statement was overhauled and pointed to stronger growth and spending. However, they did maintain their “symmetric 2% inflation objective”. This arguably relieved some thoughts that the Fed would allow themselves to move faster than a gradual pace if inflation picked up.
It is Fed day and they are expected to raise interest rates a quarter point at 1:00 p.m. Central. What’s unknown though is the tone in which they will do such. There was a report yesterday that Fed Chair Powell wants to hold a press conference after each meeting. The Dollar jumped, Treasuries ticked down and equity markets hit a midday snag. Doing this would essentially make each meeting live, giving the FOMC additional opportunities to hike.
Equity markets around the globe are seeing a bit of pressure heading into the morning. Most major benchmarks, including the DAX and Nikkei, have lost about 0.5%. The Hang Seng is down 1.7% and emerging markets continue to weigh on global sentiment.
Major U.S. benchmarks grinded forward in the second half yesterday and added gains overnight. Buzz that China offered to add $25 billion in purchases of U.S. goods this year turned a potentially dulling tape back north before the close. The offer comes days after Commerce Secretary Wilbur Ross left Beijing but also surfaces question marks to the $70 billion in purchases spoken of weeks ago.
Major U.S. benchmarks are holding Monday’s gains and then some this morning after the Nasdaq Composite closed at a record high to start the week. Europe is leading this morning, the DAX is + 0.8% while Asia is muted. Traders want to keep an eye on Europe as Italy’s new PM Conte faces a bit of a confidence vote, though the coalition that appointed him has a majority.
Despite a slower start, the S&P 500 followed trading up to resistance at 2744-2745.25 and the highest level since March 19. Here, Friday morning, we discussed the increasing likeliness that Nonfarm Payroll would be beneficial to stocks and that is exactly how a strong report played out; Average Hourly earnings and job growth both topped expectations at +0.3% and 223k respectively. Benchmarks around the globe are higher this morning with Asia leading the way; the Nikkei is +1.37% and the Hang Seng +1.66%.
Ahead of today’s May Nonfarm Payroll Report, there is one word that can describe the U.S. equity market this week; resilience. This market has digested every fear mongering event inching forward and awaiting the next. Tuesday morning, Italy was going break off into the Mediterranean Sea, the market battled back.