Investment Commentary – August 13, 2019

Year to Date Market Indices as of Market Close Aug 13, 2019
• Dow 26,279 (12.66%)
• S&P 2,926 (16.73%)
• NASDAQ 8,016 (20.81%)
• Gold $1,513 (17.83%)
• OIL $57.04 (24.51%)
• Barclay Bond Aggregate (8.26%)
• All World Index (12.41%)
• Fed Funds Rate 2.25 (-0.25 rate cut 7/31/19)
• US Real GDP Growth 2.1 Q2/2019 (Down from 3.1 in Q1)

Stocks rally as US delays tariffs on key Chinese imports

U.S. stocks, especially shares of tech companies, and bond yields rallied Tuesday after the White House said tariffs. On key Chinese imports would be delayed.
Early in the day’s session, equities turned positive on a report that China’s commerce secretary agreed to conduct a phone call in two weeks with U.S. Trade Representative (USTR) Robert Lighthizer, according to Reuters.

Wall Street then learned that the White House was delaying until Dec. 15 additional tariffs on certain Chinese exports.

The tech sector led the day’s gainers: Products in this group included companies that make cell phones, laptop computers, video game consoles, toys and computer monitors. Shares of footwear and clothing companies also gained.

Shares of Caterpillar and Boeing also turned positive in a reversal from the premarket session.

The U.S. consumer price index increased 0.3 percent in July. The cost of energy products led a range of goods that contributed.

The yield on the 10-year Treasury rose to 1.69 percent, up from the previous session’s yield which had settled near its three-year low.

The CPI had edged up 0.1 percent for two straight months.

US delays China tariffs for some items including cellphones, removing other products from list

The United States Trade Representative office cuts items from the list of Chinese-made products that had faced new tariffs next month.

It cited factors including health, safety and national security concerns.

The USTR also announces a delay of tariffs on electronics including cellphones, laptops and video game consoles and some clothing products until Dec. 15.

China’s Commerce Ministry says Vice Premier Liu He had spoken by phone with U.S. Trade Representative Robert Lightizer and Treasury Secretary Steven Mnuchin and they agreed to talk again in two weeks.

The United States Trade Representative office said Tuesday that new tariffs on certain consumer items would be delayed until Dec. 15, while other products were being removed from the new China tariff list altogether. It cited health and security factors.

The duties had been set to go into effect on Sept. 1, so the announcement eased concerns about the holiday shopping season.

The USTR said the delay affects electronics including cellphones, laptops and video game consoles and some clothing products and shoes and “certain toys.”

Earlier this month, President Donald Trump announced a new round of 10% tariffs on $300 billion worth of Chinese imports that eluded duties.

Markets rallied on the news. The Dow Jones Industrial Average rose 372 points, while the S&P 500 jumped 1.48% and the NASDAQ rose 1.95%.

Delays on centerpiece technology products boosted tech stocks and distributors of technology items. Apple shares traded 4.2% higher on the news and Best Buy soared 6.5%. Chip stocks also moved out of correction territory with the Semiconductor ETF down 8% from its July high.

The delay in footwear and apparel tariffs lifted retailers, including Nike, Kohl’s, and Nordstrom. The retail ETF the XRT rose 1.6%. Toy products being delayed caused Hasbro and Mattel to jump 2.75% and 4.6% respectively.

Uncertainty around the trade war has weighed on the markets. U.S. stocks had their worst day of the year on Aug. 5, when China let its currency weaken, crossing the 7 yuan-per-dollar threshold and said it would halt imports of agricultural goods from the U.S.

Around the Market

Choppy markets: U.S. stock indexes dropped for the second week in a row, but their overall declines were around a half a percentage point—tiny, given the market’s shaky start. The indexes tumbled around 3% on Monday—the largest single-day decline year-to-date—but they recovered most of that ground over the next three days.

The views presented are not intended to be relied on as a forecast, research or investment advice and are the opinions of the sources cited and are subject to change based on subsequent developments. They are not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investments.