Markets:
Market indexes fell again this week, pressured by ongoing trade war rhetoric, and a surprise expansion of the trade war to include Mexico. This was a dismal May for the market, with the DOW falling -6.69%, the S&P 500 falling -6.58%, the NASDAQ down -7.93%, and the Russell small caps down -7.85%.
“Government bonds rallied sharply Friday, sending yields sharply lower, as investors sought havens following President Donald Trump’s threat to levy tariffs on Mexico in an effort to curb immigration. The yield on the 2-year U.S. Treasury note dropped more than 7 basis points to 1.992%, dropping below the 2% threshold for the first time since February 2018, according to FactSet. The 10-year Treasury note yield tumbled 7.2 basis points to 2.151%, the lowest since September 2017. Yields fall as debt prices rise. The move was a global phenomenon, with the yield on the 10-year German government bond, or bund, falling deeper into negative territory. The bund yield was down more than 4 basis points at negative 0.21%. The tariff threat underlined worries about economic growth, analysts said, sending global equity markets skidding.” (MarketPulse)“The biggest newspaper in China explicitly warned the U.S. on Wednesday that it would cut off rare earth minerals as a countermeasure in the escalated trade battle, using an expression it only used twice in history, both of which involved full-on wars.
“We advise the U.S. side not to underestimate the Chinese side’s ability to safeguard its development rights and interests. Don’t say we didn’t warn you!” the People’s Daily said in a commentary titled “United States, don’t underestimate China’s ability to strike back.” The paper is the official newspaper of the Communist Party of China.
The phrase “Don’t say we didn’t warn you” was only used two other times by the People’s Daily in history — in 1963 ahead of China’s border war with India and in 1987 right before China went to war with Vietnam.” (CNBC)
High Dividend Stocks:
These high yield stocks go ex-dividend next week: FUN, ITUB, WSR, NLSN, SLB, TRTN, FDUS, GBDC, SNR, WHGAFIN, AMC, GCI, OXY.
Market Breadth:
0 out of 30 DOW stocks rose this week, versus 11 last week. Just 15% of the S&P 500 rose, versus 38% last week.
Volatility:
The VIX rose 14% this week, ending the week at $18.71.
FOREX:
The USD fell versus most major currencies once this week, except the yen and the Swiss franc.
Economic News:
“Consumer confidence surged in May to a six-month high, spurred by a strong labor market, a new survey showed. Higher gas prices and a flareup in trade tensions with China appeared to do little to dampen the optimism of Americans. The consumer confidence index climbed to 134.1 from 129.2 in April.” (MarketWatch)
“Consumer sentiment suffered a blow in the final two weeks of May after the trade spat between the U.S. and China erupted into another round of tit-for-tat tariffs. The University of Michigan’s final results for consumer sentiment in May was lowered to 100 from a preliminary 102.4 reading.” (MarketPulse)
“As part of the SECURE Act, which the House of Representatives passed last week, individual retirement accounts’ age cap would be lifted, small businesses would have more avenues to offer retirement plans to their employees and part-time workers would get access to 401(k) accounts. The legislation would also boost the use of annuities in retirement accounts — something that may tilt a few heads considering the bad reputation annuities typically get for being an upfront expense with an uncertain payout (such as, if the owner of an annuity dies before reaping the benefits, or being tied to a seven- to 10-year contract).
Currently, plan providers have the fiduciary responsibility to vet annuities but under the safe harbor provision of the SECURE Act, the onus would be placed on insurers to provide employers with the right products. Employers would be given guidance on how to ensure those providers and their products are up to par, including reviewing the insurers’ status under state insurance regulation and enforcement.” (MarketWatch)
Week Ahead Highlights:
It’ll be a heavy data week, with the closely-watched Non-Farm Payrolls report due out Friday, and the ADP employment report due out on Wed., in addition to the Fed policy meeting in mid-week.
Futures:
WTI Crude fell -16.51% this week, finishing the week at $53.36, its lowest point since mid-February, while Natural Gas fell -4.31%.
“U.S. oil futures dropped Thursday to finish at their lowest in more than two months after U.S. government data showed a modest weekly decline in domestic crude stockpiles, along with an increase in crude production to a record.” (MarketPulse)
