The market finished slightly lower for the week, but the Russell 2000 continued to reach new all-time highs.

The tone of the week was largely positive and breadth encouraging as there were more 52-week highs then new lows every day on the NASDAQ and every day except Tuesday on the NYSE.

Overall the market is up for the month after that dramatic intraday reverse on May 2^nd investors are now looking for the next catalyst(s). 

I agree with President Trump; the market is watching trade negotiations closely.  Considering trade through April with the three nations, China, Mexico and Canada:

• Imports $282 billion
• Exports $169 billion

But what about traditional drivers of the economy and stock market?

While businesses are doing great and stepping up investments the big question these days revolve around the state of mind of the American consumers.

Consumers have the cash as wages are higher and disposable income after servicing debt remains high.  There is less stress but curious reality emerging among consumers.

Great Recession Hangover

We learned last week from the New York Fed that Americans are sitting pretty but acting tepidly and that could have consequences for the economy.

1. Record low bankruptcies
2. Record high household net worth
3. Record low credit inquires

I say folks are smarter having lived through the Great Recession and many will never get over their financial miscues again if they can help it.  That means using debit and paying off credit when they can.  It means they won’t over spend on things like toilet paper or soup (see Campbell’s soup drubbing).

Then there’s the competitive nature of retail, particularly brick and mortar retail which has been hit or miss with Macy’s surging this week as Nordstrom’s was hammered.

Overall the S&P Retail ETF (XRT) has been on fire and next week we will hear from a slew of retailers including: TJ Maxx, Kohl’s, Target, Ralph Lauren, Tiffany, Best Buy and the Gap.

Today’s Session

China Trade Showdown: Averted?

A grand bargain is rapidly being hammered together which could result in China:

+ Imports US goods

+ 40% agriculture imports

+100% energy imports

+ Technology protections

Mainstream media replies: Trump all bark no bite.  LOL!  The fact of the matter is the US media and all of those that never heard of ZTE until two weeks ago are making it easier for China to drive a harder bargain.  There are a lot of details to be hammered out so it’s not a done deal, but the saber-rattling is over as the focus has shifted to resolution which means a better deal than we had when the elites in America railed against the Trump administration for disrupting the status quo.

In the end I want technology protections but it’s the core of China’s ambitions.  A deal the slows that and opened china’s market would be monumental.

Period!

In addition to the China news there’s the strong earnings pronouncement from Micron powering semiconductors and a general sense North Korea will be solved at some point.

Comments

I think a large chunk of the raises is going to increased employee benefit costs. They don't have anything additional to spend has been my conjecture the last six months. Interestingly enough I just got a raise. My employee health insurance is increasing premiums by 75%. Half of my raise is going to premium increases therefore. I guess on the bright side I do have the other half I can buy stock with. Brian Bigelow on 5/21/2018 10:42:46 AM

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