U.S. equities bounced off their early lows that came from global growth concerns, political uneasiness, and escalated U.S.-China trade tensions, to finish solidly higher. The robust reversal came as the U.S. Trade Representative announced the removal of certain tariffs on Chinese goods that were expected on September 1st and the delay of certain tariffs to December 15th. As well, reports that the U.S. and China held a phone conversation and are expected to resume phone negotiations within two weeks appeared to also lend support. Treasury yields, the U.S. dollar and crude oil prices were higher following the news, while gold pared a recent rally to six-year highs. On the economic front, consumer prices came in a bit hotter than expected and small business optimism moved higher. Meanwhile, in equity news, Advance Auto Parts fell short of the Street’s quarterly estimates, and shares of GE jumped after it disclosed that its CEO bought nearly $3.0 million of additional shares.
The Dow Jones Industrial Average (DJIA) jumped 382 points (1.5%) to 26,280, the S&P 500 Index increased 43 points (1.5%) to 2,926 and the Nasdaq Composite advanced 153 points (2.0%) to 8,016. In moderate volume, 856 million shares were traded on the NYSE and 2.3 billion shares changed hands on the Nasdaq. WTI crude oil rallied $2.17 to $57.10 per barrel and wholesale gasoline was up $0.07 at $1.74 per gallon. Elsewhere, the Bloomberg gold spot price fell $7.93 to $1,503.23 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—added 0.5% to 97.81.
The Consumer Price Index (CPI) rose 0.3% month-over-month (m/m) in July, matching the Bloomberg estimate, and above June’s unrevised 0.1% increase. The core rate, which strips out food and energy, was 0.3% higher m/m, versus expectations of a 0.2% increase and in line with June’s unadjusted rise. Y/Y, prices were 1.8% higher for the headline rate, topping forecasts of a 1.7% increase, and north of June’s unadjusted 1.6% rise. The core rate was up 2.2% y/y, above projections calling for it to match June’s unadjusted 2.1% gain.
The National Federation of Independent Business (NFIB) Small Business Optimism Index for July ticked higher to 104.7 from June’s unrevised 103.3 level, and versus expectations of an increase to 104.0. NFIB President and Chief Executive Officer (CEO), Juanita Duggan noted, “While many are talking about a slowing economy and possible signs of a recession, the 3rd largest economy in the world continues to defy expectations, generating output, creating value, and expanding the economy,” adding that “small business owners want to grow their operations, and the only thing stopping them is finding qualified workers.”
Treasuries finished lower, as the yield on the 2-year note jumped 10 basis points (bps) to 1.67%, the yield on the 10-year note gained 5 bps to 1.68%, and the 30-year bond rate moved 2 bps higher to 2.15%. The global markets continued to be skittish on global growth concerns, escalating unrest in Hong Kong, Italian political and U.K. Brexit uncertainty, as well as the recent Fed rate cut and elevated expectations that further reductions were likely this year. However, stocks, bond yields, and the U.S. dollar turned higher, and gold pulled back from a six-year high, on reports that U.S. and China officials have held talks, and as the U.S. Trade Representative (USTR) announced that certain products are being removed from the tariff list that are set to kick in September 1st. The USTR also said it determined that tariffs should be delayed to December 15th for certain products, including cell phones, laptop computers, video game consoles, certain toys, computer monitors, and certain items of footwear and clothing. U.S.-China trade concerns also eased on reports that the U.S. and China held a phone conversation and plan to hold another round of phone discussions within the next two weeks.
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