U.S. Treasury: Chinese Tariffs On Hold, Pre-Markets Gain

Monday, May 21, 2018

Market futures are generously in the green in the first pre-market trading day of the week, even with no major national economic data or quarterly earnings reports from marquee names on the S&P 500. Yet talk over this past weekend from U.S. Treasury Secretary Steven Mnuchin — that offsetting tariffs between the U.S. and China are being put on hold — looks to have generated a pleasant sigh of relief from traders early today.

In fact, Mnuchin said the tariff dispute was never a “trade war,” as some have glibly named it — it’s only ever been a “trade dispute.” And, for now, both sides have decided to postpone enacting tariffs on each other’s goods, which removes one dark cloud from the economic landscape, at least in the present. U.S. farmers, as well as American companies that do lots of business in China, like Apple (NASDAQ:AAPL) , Boeing (NYSE:BA) , Nike (NYSE:NKE) and McDonalds (NYSE:MCD) , all look toward a near-term benefit in share prices.

At this hour, we are seeing implied opens on our main indexes in solid green territory: the Dow has an implied open of +230, the Nasdaq +50 and the S&P 500 +15. That said, with a real dearth of economic indicators for the rest of the day — indeed, we don’t even get the latest PMI data (Manufacturing and Services) until Wednesday of this week — any further news on this front or elsewhere may have an opportunity to shift investor focus one direction or the other. Should Mnuchin’s comforting words remain the principle narrative today, we don’t really see much drag on current index valuations.

This morning’s Chicago Fed National Activity Index (CFNAI) report for April was released this morning, with a slight beat sequentially and higher than expectations. Growth of 0.34% eked out a narrow margin over March’s 0.32%, whereas analyst had been looking for 0.25%. The index is a survey taking into account 85 separate national indicators concerning things like production, employment and consumption. As such, it is an economic metric like many others we track, and again we see modest growth without much strain from inflation.

We hope the newsworthiness of market activity picks up this week, in order to better serve our readers in making sound investment decisions. in the meantime, please check out Zacks Chief Strategist John Blank’s latest Global Week Ahead article: More Populism and More Inexperience

Mark Vickery
Senior Editor

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