Fundamentals Drive Market Movement

 

Factory Orders Slow Down

Factory order data for April was released today, exhibiting a greater than expected pullback in the manufacturing sector in the US.  This decline was lead by the decrease in demand for transportation equipment, which was down 6.0%, driven by a drop in demand for the highly volatile civilian aircraft of 28.9%.   Overall factory orders declined 0.8% (vs. expectations of a 0.5% drop) for the month, composed of a 1.6% drop in durable goods orders and a 1.0% rise in non-durable goods orders.  The 0.8% decrease in new orders represented the steepest drop-off since orders fell 1.6% in January, although on a YoY basis orders were still up 8.3%.   

Fundamental Strength In Markets

Major US stock indices posted gains today as the fundamentals of strong earnings and the strong economy outweighed the still murky outlook on trade.  The Dow led the way today with a 0.72% gain, +0.69% for the NASDAQ and a gain of 0.45% for the S&P.  US Treasurys sold off again, as yields/swap rates were up 3-5bp across the curve.  The 10-year note yield was up 4bps, closing at 2.94%.  The US Dollar (USD) was up vs the Pound (GBP) gaining 0.2%, and down vs. the Euro (EUR) — losing 0.3%.  Crude oil futures fell to the lowest level in almost a month, as OPEC continued to focus on increasing supply, closing at $64.88/barrel, down 1.4%.

 

“G6 Plus One”

Over this weekend, finance ministers from the world’s most industrialized nations (Canada, France, Italy, Germany, U.K., Japan and US) met in Canada for the first round of discussions at the annual G-7 (Group of Seven) Summit.  While the theme of the gathering is generally to promote joint economic growth, there is a widely held view that this year’s discussions will continue to center around the “America first” trade mentality of the Trump administration, which has put a rift in a number of the relationships between the US and its closest allies.  “It has been a tense and tough G7 — I would say it’s been far more a G6 plus one than a G7,” Bruno Le Maire, France’s finance and economy minister, stated on the impact that the trade tariffs have had on the group.  On the other end of the spectrum, Trump economic adviser Larry Kudlow continues to express optimism, labeling the tariff disagreements as only a “family quarrel.”  Trump is set to attend the meeting June 8th-9th, and three days later, he is scheduled for his much anticipated trip to Singapore to meet with North Korea.