The market is largely marking time ahead of a big weekend meeting between President Trump and President Xi approach.  News that China is making demands about removing tariffs and the inclusion of Huawei is a good sign that serious negotiations are going to take place rather than talk of saving face. I think “demands” from China is good news – a necessary part of negotiations. 

Leaks and speculation will dominate news today and tomorrow putting the Fed on the backburner. The Fed must still pay close attention to economic developments beyond current or potential further tariff issues. 

This morning, economic data was mixed.

Home Sales

Pending home sales (contracts signed) improved 1.1 over April, coming in better than consensus of +0.6%, but it was the seventeenth straight month of year over year declines.

Pending Home Sales Regional Trends	PHSI	M/M	Y/Y
Northeast	92.0	+3.5%	-0.5%
Midwest	100.3	+3.6%	-1.2%
South	124.1	+0.1%	+0.7%
West	91.8	=1.8%	-3.1%

PHSI (year to year)

Employment

Initial jobless claims edged higher to 227,000 against consensus of 220,000.

Overall, the market is cautiously optimistic.

Advancers outpacing decliners

•             2 to one on NYSE

•             3 to one on NASDAQ

Ten of 11 sectors are higher and only 1/3 of the DJIA components are lower.  There’s still caution in the air (hence, bigger moves in Real Estate and Healthcare) and Financials are now value stocks.

S&P 500 Index	+0.28%
Communication Services (XLC)	+0.35%
Consumer Discretionary (XLY)	+0.36%
Consumer Staples (XLP)	+0.05%
Energy (XLE)		-0.36%
Financials (XLF)	+0.85%
Health Care (XLV)	+0.59%
Industrials (XLI)	+0.01%
Materials (XLB)	+0.35%
Real Estate (XLRE)	+0.95%
Technology (XLK)	+0.10%
Utilities (XLU)	+0.13%

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