March 9, 2018.
Whatever it was Trump had to day, markets shrugged off his rhetoric, with all major indexes climbing on the day. It used to be called the “Trump trade.” What that meant going into Trump’s first year in the Oval Office was riding the wave of optimism, gains fueled by optimism that Trump would do as promised, slashing taxes, bureaucracy, and regulation. First, he fell on his face, failing to get rid of Obamacare. And then, with a Congress divided into clear and un-budging factions, he pushed through tax reform, giving Wall Street its long sought after coup. With Cohn on board as the president’s chief advisor, things were looking golden, almost too good to be true. And then it happened, with little warning, with some in Trump’s innermost circle saying that they had no clue what was coming, Trump rolled out what seemed to be a hastily prepared announcement, devoid of foresight, that essentially laid down the groundwork for an international trade war. George W. Bush had tried to place a tariff on steel, but to little avail; it caused tremendous economic damage and was ultimately ruled unlawful by the WTO.
And now, Trump is scrambling again. We’ve gotten used to that pattern already. Bombastic announcements, hairpin turns, shifting public views, and then the “Trump spin,” the president backing down but then making it look as if that was his plan all along, to create leverage, capitalized on to his greater end. When Mexico’s President used an expletive to describe Trump, the latter said he’d make the wall higher. A man of show, who can put his money where his mouth is – when it’s other people’s money, the same way it was in his business career. And it could be now that markets are picking up on that, that Trump, a PR genius, a master of the pomp and circumstance, will always find the way to appease the mainstream, backing down, leaving open the possibility for reconsideration, the same way he’s done here. First Canada and Mexico were in, i.e. bound by the tariffs, and then they were out, conditional of course on favorable NAFTA terms. What the market did yesterday was spit in the face of Washington, the focus returning to the fundamentals, the economy strong, pushing off the risks of long-term damage. We really, do, though, have to see how tariffs play out because if Trump wants to get re-elected, he sees it as his clearest appeal or selling point for racking up the swing states responsible for his first White House term.
In other economic news, U.S. mortgage rates climbed to 4-year highs. With the spring buying season around the corner, it remains to be seen how markets will respond. Freddie Mac, the mortgage buyer, related that the average rate on a 30-year fixed rate mortgage had climbed to 4.46%. The National Association of Retailers had shared that they had seen a downtick in home sales from December to January. This uptick in mortgage rates has been seen over the last nine weeks.
One last notable thing in yesterday’s political wrangling was an interesting twist, with Elon Musk, CEO and Founder of Tesla appealing directly to Trump to impose more tariffs on China. Whereas Paul Ryan has come out like Cohn against the tariffs – as have 107 Republican congressmen in an open letter to the president – Musk has taken an opposite approach. Musk tweeted, ” Do you think the US & China should have equal & fair rules for cars? Meaning, same import duties, ownership constraints & other factors.” Musk also invoked what he saw as Obama’s failure to resolve the imbalance. Musk, likewise added, “I am against import duties in general, but the current rules make things very difficult. It’s like competing in an Olympic race wearing lead shoes,” offering the president what could be seen as much more than a veiled hint: “Just want a fair outcome, ideally where tariffs / rules are equally moderate. Nothing more. Hope this does not seem unreasonable.” And what did Trump to. He grabbed the bait, reading Musk’s comments aloud during the televised announcement!
Daily Summary: All major indexes climbed, the blue chip Dow up 0.38%, the S&P 500 tacking on 0.45% and the NASDAQ trading up 0.42%. The NASDAQ is up 3.45% over the last 5 days. Over the last 5 days, the best performing sector has been IT, with gains of 4.54%. Utilities led the S&P 500 higher yesterday with gains of 0.60%, followed by consumer staples and telecomm. The worst performing sector on the S&P 500 was materials, which shed 0.30%.
On the Economic Calendar, be primed for a busy, jam-packed day! Nonfarm Payrolls and the unemployment rate will be coming out at 8:30, along with average hourly earnings at the same hour. Wholesale trade numbers will be released at 10:00.
Friday’s Hot Stocks: INSY, LOCO, MRVL, UNFI, FNSR
Have a great trading day!
|Wednesday||8:30||Productivity and Costs||-0.1 %||Medium|
|Wednesday||10:30||Oil Inventories||3.0 M barrels||Low|
|Thursday||8:30||Jobless Claims||220 K||Medium|
|Friday||8:30||Unemployment Rate – Level||4.0 %||High|
|Friday||8:30||Average Hourly Earnings||0.2 %||High|
|Friday||10:00||Wholesale Trade||0.7 %||Medium|
|ROST||Ross Stores, Inc.||PM||Tuesday|
|URBN||Urban Outfitters, Inc.||PM||Tuesday|
|DLTR||Dollar Tree, Inc.||AM||Wednesday|
|COST||Costco Wholesale Corporation||PM||Wednesday|
|CZR||Caesars Entertainment Corporation||PM||Wednesday|
|AEO||American Eagle Outfitters, Inc.||AM||Thursday|
|NAV||Navistar International Corporation||AM||Thursday|
|DVMT||Dell Technologies Inc.||AM||Thursday|
|KR||The Kroger Co.||AM||Thursday|
|MRVL||Marvell Technology Group Ltd.||PM||Thursday|
|UNFI||United Natural Foods, Inc.||PM||Thursday|
|BIG||Big Lots, Inc.||AM||Friday|
|XRAY||DENTSPLY SIRONA Inc.||AM||Friday|
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