Afternoon Note
It took the market a few hours to decide that strong employment isn’t really all that bad. The Dow started the day lower by 100 points, but it recouped its loses by midday. Then a negative headline regarding President Trump commenting that “another” $267 billion of tariffs on China were possible “if he wants.” The Dow reversed lower by over 150 points once the news was disseminated. If these new tariffs are in addition to the $200 billion in tariffs already proposed, it would come close to equaling the total of imports from China in 2017 ($506 billion).
Wage growth and a decline in manufacturing employment were the two main issues the markets were focused on this morning. Wage growth has been sluggish for most of the economic recovery since the end of the great recession in June 2009. With a tight labor market, unemployment below 4%, it should not be a surprise that wages are rising as employers need to retain their existing workers as well as entice new workers to come off the sidelines. The positive is that the extra money consumers have to spend should help keep the economy chugging along. Consumer spending makes up approximately 70% gross domestic product (GDP).
Another concern to come out of the nonfarm payroll report was the decline in manufacturing. Manufacturing fell by 3,000 as uncertainty regarding trade tariffs held back hiring even though orders are strong coupled with the lack of skilled employees. Some manufactures are forgoing expanding their businesses as uncertainty surrounding tariffs continues to weigh on their decision making. As was mentioned in this morning’s report, demand remains strong, the Atlanta Fed is still modeling for 4.7% GDP growth with three weeks to go in the quarter.
Housing stocks were weak today as the yield on the 10-year treasury shot up 5 basis points to 2.93%. Retail is strong with restaurant stocks leading the way. Brinker International (EAT), the owner of Chili’s Grill & Bar and Maggiano’s Little Italy is higher by close to 3%.
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Comments |
The market should know by now that Trump is creating a posistion of strength with these comments regarding China. The eventual conclusion will be positive for America as it cant get much worse. Ken Knight on 9/7/2018 1:50:56 PM |
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