Daily Market Color June 25, 2018Trade War Developments Move Markets Trade Tensions Ramp Up Trade war concerns dominated market sentiment today after an article published in the Wall Street Journal over the weekend claimed that the Trump Administration planned specific measures to target the protection of US intellectual property in the technology sector. Attempting to deescalate the tension, Treasury Secretary Mnuchin tweeted that the article didn’t have merit and that any plan for intellectual property protection would not be specific to China. Later in the day, Peter Navarro, Director of the National Trade Council, confirmed there were no immediate plans to “impose investment restrictions on any countries that are interfering in any way with our country.” Shifting to the tariff battle with Europe, Harley-Davidson announced today that it would consider producing bikes to be exported to the EU in locations outside the United States. The move would result in the iconic motorcycle maker cutting jobs at US locations with the intention to avoid costly EU tariffs that would ultimately require passing an increased product price onto the buyer. Ironically, in the past President Trump has used Harley-Davidson as an example of his desire to “Make America Great Again”. Overall, this operational shift is an analysis that major companies around the world will have to consider given the real possibility for trade wars and their impacts on future policies. Equity Markets Fluctuate with Trade Comments Trade tensions led to a day of big swings in the markets as concerns over the trade situation escalated. Equity markets felt the heat, with all three major indices down on the day. If not for a late day rally off the back of Director Navarro’s comments, the losses would have been even greater. The NASDAQ took the biggest hit today on concerns for foreign investment in technology, sinking 2.09%. The S&P and DJIA posted lesser, but still significant declines falling 1.37% and 1.33% respectively. Treasuries rallied throughout the day, with yields falling 1-2 bps across the curve. The 10-year closed at a yield of 2.88%. In foreign exchange markets, the US Dollar (USD) lost 0.3% vs. the Euro (EUR) and was down 0.1% vs. the Pound (GBP). The oil market continues to digest OPEC’s increased production, but the selloff was tempered today due a power outage as a result of a blown transformer at a large Oil-Sands facility in Canada. Crude oil futures ended the day down 0.4%, closing at $68.19/barrel. New Home Sales Increase New home sales for May hit a six-month high, highlighted today’s key economic data releases. New home sales were up (+6.7%) MoM to a seasonally adjusted 689,000 pace, alongside downward revisions to the prior month (-16,000). The May figure exceeded median forecasts of 667,000. Regionally, purchases in the South were up 17.9% outpacing the decrease in purchases in the Northeast (-10.0%) and West (-8.7%). There is a strong pipeline of construction work as the number of homes sold, but not yet started, hit a six-month high. Affordability remains a persistent challenge for first time buyers as increases in both prices and mortgage rates continue to outpace wage growth.