The market opened under pressure reacting to an article in the WSJ pointing to new plans by the administration to curb investing by Chinese companies into critical areas involving technology that could power the China 2025 initiative.   The impact got worse after Stephen Mnuchin put out a tweet that suggested barriers to investments for all countries.  I don’t think that was his intent, but it was a poorly written tweet at the very wrong time.

The biggest hit is happening in technology where computer chip markers are under huge pressure, which actually began in early June after the semiconductor index (SOXX) hit a double top formation. 

I’ve always said there could be some pain and some angst from the trade skirmish on Main Street, but first there would be periodic Wall Street tantrums.  The reactions are designed to pressure the White House, but it can obviously harm the economy, too.

Initially, the S&P 500 found support at its 50-day moving average of 2,715.  The bounce off that average was short lived as the S&P traded down to 2,702 before finding support.  Currently, the S&P 500 is trading @ 2,713.  If the S&P 500 can regain the 2,715 level on a closing basis, we would consider that a market positive.  

The markets have a defensive tone now, as utilities, staples, drugs and telecom are outperforming.  More M&A news out today, this time from Gray Television (GTN) and Raycom Media, which have announced their intent to merge. This deal would create the third-largest television broadcast group in the United States.   

This morning saw a strong report on new home sales underscoring the fact the U.S. economy is on fire.

New home sales for May came in at a seasonally adjusted annual rate of 689,000, better than the consensus of 668,000.  May sales were 6.7% above the revised April rate, which was revised downward from 662,000 to 646,000.  New home sales increased 14.1% year over year and 8.85% from the beginning of 2018.   

Sales by Region:

• Northeast decline 10%
• Midwest was unchanged
• South was up a strong 17.9%
• West declined 8.7%

The median sales price in May was $313,000.00, down 1.73% from the prior month of $318,500.00, and down 5.03% from the beginning of the year’s median price of $329,600.00.  Inventory is still tight however.  The inventory to sales ratio declined to 5.2-months from 5.5-months in April.  This ratio indicates the amount of time it would take to sell current inventory at the current sales pace.

New home sales in the $150,000 to $199,999 price range increased 5% from April.  This may be indicative of first time home buyers entering the market as they feel better about the economy and interest rates have remained relatively steady.