It’s been one heck of day in the markets as news that the potential trade war was escalating crushed stocks at the open. However, the realty of all this is that both sides are merely announcing tariffs, and we have a long way to go before there are any tariffs increased or even added.   The talking heads on TV acted like the world was coming to an end. Considering that the China tariff’s amount to approximately 0.3% of U.S. GDP, the same amount of the proposed US tariffs, we were a bit surprised at the market’s reaction on the open.  Commerce Secretary, Wilbur Ross, confirmed our thoughts commenting that “this news should not be a great shock to Wall Street”.      

Although equity markets opened weak, other indicators we monitor did not confirm the weakness.  The Dow was down 510 and now is down 100.  The S&P and the Nasdaq have erased all the losses and reversed into positive territory.  They are now hugging the flat line.  This action is impressive and may have been the third successful retest of 23,500 on the Dow Jones Industrial Average.

Energy is trading down today despite the unexpected decline in crude oil inventories.

WTI is currently down a half a percent to $63.15. 

On a brighter note, the March ADP non-farm private payrolls add 241,000 jobs, far exceeding the expectations for an increase of 205,000 job. February was revised higher to 246,000.  This marks the fifth consecutive month that jobs have increased by more than 200,000. 

The job market is on fire and midsize firms added over half of the jobs, up 127,000; the greatest increase for this segment since the fall of 2014.

Job creation was across the board with goods producing jobs adding 65,000 while the service sector added 176,000. Construction and manufacturing continue to accelerate their pace of growth.  Manufacturing had its highest increase in more than 3 years. 

These numbers set up this Friday’s job report nicely.  Expectations are for an increase of 185,000 and for the unemployment rate to drop from 4.1% to 4%.

The ISM Non-Manufacturing Index for March was 58.8 down from February’s reading of 59.5.  The Price Index sub-component rose to 61.5 from 61.  This increase was not as drastic as the Manufacturing Index increase earlier in the week.  It marked the 25^th consecutive month of price increases.  New Orders dropped to 59.5 from 64.8 but remain in expansion mode above 50.  The numbers point to an economy that is still chugging along, but at a bit slower pace in the first quarter.