Export and Import Prices

Export prices were unchanged in September after declining 0.2% in August.  Agricultural exports prices declined 1.4% in September.  Excluding agriculture, export prices rose 0.2%. 

Import prices rose 0.5% compared to a decline of 0.4% in August. The rise in import prices was driven by fuel imports, which were higher by 3.8%.  Excluding fuel, import prices were unchanged.  

Surprisingly, imports from China rose 14.5% in September from year ago levels.   A weaker renminbi may have helped take some of the bite out of the tariffs imposed on the $250 billion in China exports.  China’s trade surplus with the U.S. rose to a record $34.13 billion in September, surpassing the previous record of $31.05 billion in August.   The surge in exports may be front ended as exporters ramped up shipments ahead of the September 24 tariff date.  Exports of electrical machinery (the largest export item from China), textiles, furniture and chips all rose faster than the prior month. 

University of Michigan Consumer Sentiment

The preliminary University of Michigan Index of Consumer Sentiment for October came in at 99.00 compared to the final reading of 100.1 for September.  The October reading was still higher than the 2018 average of 98.5.

• The Current Economic Conditions Index declined to 114.4 from 115.2
• The Index of Consumer Expectations slipped to 89.1 from 90.5

Consumers inflation concerns related to household incomes weighed on consumer sentiment.  Downward revisions in the rate of growth in household incomes was accompanied by an upward revision in the year-ahead expected inflation rate, which weakened real income expectations.  

WTI crude began the week at $73.90 and is currently down 3.85% to $71.05.  The latest Baker Hughes report showed the U.S. total rig count increased by 11 last week for a total of 1,063.  Oil rigs were up 8 to 869.  The U.S. rig count is up 126 oil rigs from last year.  

Despite Fed chatter, the 10 year is on pace for a decline of on the week. After reaching a high of 3.48%, it is now trading at 3.14%.  So we will see how “loco” the Fed really is. 

Equites markets opened strong but have since drifted lower.  The selling picked up some steam after   White House economic Advisor Larry Kudlow commented that he could not confirm that a meeting between President Trump and Chinese President Xi Jinping would occur at the G-20 summit in Argentina next month.  The Dow Jones Industrial Average briefly turned negative, while the Nasdaq and S&P 500 held above yesterday closing levels.

Financials have rolled over after reporting earnings this morning.   PNC, Well Fargo (WFC), Citi (C) and JPMorgan (JPM) reported earnings.  Citi is the only one holding onto its gains.  PNC’s loan growth came in below expectations due to competition from non-bank lenders, and the stock is trading lower by over 7%. 

The Dow retested yesterday’s low, held and is now trying to regain its footing.  Re-testing the high on a Friday seems impossible, and without financials leading the way, it would take comments from a major Fed official to move it higher; albeit, a move up to 25,233 would be a big moral victory.    

• The Dow is up 50 points, +0.27% to 25,120
• The S&P 500 is higher by 0.55%
• The Nasdaq is higher by 1.07%
• The Russell 2000 is lower by 0.20% (financials comprise 17% of the Russell 2000)

Breadth:

• NYSE advancers 1,422 to decliners of 1,547: new 52-week highs 7 to new lows 337
• Nasdaq advancers 1,702 to decliners 1,267; new 52-week highs 15 to new lows 15