An update to today's data is called for given that the Trump administration imposed a 10% tariff on the remaining of China-to-U.S. goods previously un-taxed $300 billion in Chinese goods set for importation. This move is the latest in trade negotiations that have see-sawed from unsure to ugly to optimistic, and now back to ugly again. The tariffs are set to take effect on September 1.
Domestic stocks, which had been up over 1%, gave back gains and look to be set to close closer to -1% on the day. Oil fell by 7%.
---information below was written before new tariffs were announced---
After a significant flattening of the yield curve after yesterday's FOMC meeting and subsequent market-lurching press release, the market has re-bought duration and equities. The S&P 500 has nearly closed the pre-FOMC gap at 3,015. Helping the bid to duration was a worse than forecast Institute for Supply Management survey for July, the lowest reading since 2016, which raises the downside risks for the manufacturing component of tomorrow's non-farm payrolls data release.
As of midmorning, all three major stock indexes were up between 1% and 1.5%. The Dow in particular was lifted by Microsoft, IBM, Intel, Cisco, and Apple, its five largest gainers on the day.
While the manufacturing reading today showed July growth at 51.2, still above the expansion/contraction line, the number is down from 51.7 in June and continues a trend of slowing growth in manufacturing. Declines in business spending and exports are the key culprits, both of which are of course tied in large part to global trade negotiations.
The -2.8 reading in manufacturing employment is concerning as that sector has buoyed the overall PMI data in recent months. Production, prices, backlogs, exports, and imports were all down as well. On the positive side, new orders, inventories, and deliveries were all up modestly.
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