Daily Market Color

Equities Continue Higher, Tariff Concerns Persist


Equities Post Gains for Second Straight Day

Equity markets closed the first trading day of Q3 in positive territory, albeit on limited volume in the shortened 4th of July holiday week.  All three major indices posted gains on the day, with the NASDAQ leading the way (+0.76%) and the S&P 500 and DJIA posting respectable gains of (+0.31%) and (+0.19%).  US Treasurys fluctuated throughout the trading session before finishing with modest selloff, as rates climbed 1-2 bps across the curve.  The 10-year Treasury note closed the day at a yield near 2.87% (+1bp).  WTI crude futures settled 0.3% lower at $73.93/barrel, weighed down by news of increased production out of OPEC and Russia.  In foreign exchange markets, the USD Dollar (USD) rose 0.6% against both the Euro (EUR) and British Pound (GBP).



This Week in Tariffs

Earlier today the White House expressed its discontent with the recently announced tariffs by Canada.  As it stands currently, our neighbor to the north will levy roughly $12.6 billion worth of import duties targeting steel and aluminum tariffs in retaliation for those enacted by the Trump administration.  “Escalating tariffs against the United States does nothing to help Canada. It only hurts American workers,” White House Press Secretary Sarah Huckabee Sanders stated, “We’ve been very nice to Canada for many years, and they’ve taken advantage of that – particularly advantage of our farmers.”     



Separately, this Friday is scheduled to be the go-live date for a series of back-and-forth tariffs between the US and China.  Barring a setback or negotiation ahead of time, the US will levy import duties on $34 billion in Chinese imports, largely affecting marine engines and power turbines.  In response, China will retaliate with its own set of tariffs targeting US-manufactured cars.  Many large automakers, including BMW, Hyundai, and GM, have already come forward to request that the White House ease its plan for tariffs via a formal letter to President Trump.


Manufacturing Activity Remains Strong

Today’s release of the Institute for Supply Management’s index of factory activity for June highlighted the key economic data releases.  The 60.2 level, which was one of the highest readings on record in the past 14 years, exceeded expectations of 58.5.  In addition, this was a 1.5 uptick from May’s 58.7 reading.  Lead times, however, were some of the longest in nearly 40 years, and the 68.2 reading may have inflated the headline number.  A portion of the longer lead time may be a result of procurement teams’ efforts to acquire products ahead of the Trump administration’s planned taxes on Chinese goods.  A slight slowdown in new orders was reported, as a measure for sales declined to 63.5 from 63.7 (albeit any 60+ figure remains representative of robust growth).  The overall ISM manufacturing index has now recorded a reading higher than 55 for 13 consecutive months.  17 of the 18 manufacturing industries reported growth in June, providing further proof of the overall strength of  the report.   


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