Markets Tumble into the Close on President’s Announcement…..

U.S. equities lost steam in the final minutes of trading to finish lower after President Trump said that he would be giving a news conference tomorrow regarding China, as tensions between the U.S. and the Asian nation have ratcheted higher lately. Continued optimism over the slow reopening of the world’s largest economy boosted stocks early on, and as investors appeared to shrug off a plethora of data that continues to show the severe disruption of the COVID-19. In economic news, weekly initial jobless claims continued to decelerate but remained above the 2.0 million mark, Q1 GDP was revised to a 5.0% contraction, durable goods orders fell by a smaller amount than expected, and pending home sales tumbled. On the equity front, HP missed Q2 revenue estimates and issued disappointing Q3 guidance, Toll Brothers topped profit forecasts and offered some upbeat commentary, Dollar Tree posted stronger-than-expected results, along with Dollar General, but the latter withdrew its guidance. Treasury yields finished mixed and the U.S. dollar was lower, while gold gained ground, and crude oil prices saw gains. Europe was broadly higher amid the early enthusiasm, while Asia was mixed.

The Dow Jones Industrial Average declined 148 points (0.6%) to 25,401, the S&P 500 Index decreased 6 points (0.2%) to 3,030, and the Nasdaq Composite lost 43 points (0.5%) to 9,369. In heavy volume, 1.0 billion shares were traded on the NYSE and 4.0 billion shares changed hands on the NASDAQ. WTI crude oil rose $0.90 to $33.71 per barrel, and wholesale gasoline gained $0.01 to $1.03 per gallon. Elsewhere, the Bloomberg gold spot price gained $8.63 to $1,718.10 per ounce, while the Dollar Index—a comparison of the U.S. dollar to six major world currencies—moved 0.5% lower to 98.53.

Weekly initial jobless claims came in at 2,123,000 for the week ended May 23rd, above the Bloomberg estimate of 2,100,000, and compared to the prior week’s upwardly-revised 2,446,000 level. The four-week moving average fell by 436,000 to 2,608,000, while continuing claims dropped by 3,860,000 to 21,052,000, south of estimates of 25,680,000. The four-week moving average of continuing claims for the week ended May 16th rose by 760,250 to 22,722,250.

The second look (of three) at Q1 Gross Domestic Product  the broadest measure of economic output, showed a quarter-over-quarter (q/q) annualized rate of contraction of 5.0%, revised from the first release’s 4.8% drop, versus forecasts to be unrevised and compared to Q4’s unadjusted 2.1% expansion. Personal consumption was revised to a 6.8% decrease, better than expectations of an adjustment to a 7.5% drop, from the initially-reported 7.6% fall. Q4 consumption was unrevised at a 1.8% rise.

On inflation, the GDP Price Index was revised higher to a 1.4% increase, versus estimates calling for it to be unadjusted at a 1.3% gain, while the core PCE Index, which excludes food and energy, was revised lower to a 1.6% increase, compared to forecasts to match the prior reading’s 1.8% rise.

April preliminary durable goods orders (chart) fell 17.2% month-over-month (m/m), versus estimates of a 19.0% fall and compared to March’s unfavorably-revised 16.6% drop. Ex-transportation, orders declined 7.4% m/m, versus forecasts of a 15.0% decrease and versus March’s negatively-adjusted 1.7% decline. Moreover, orders for non-defense capital goods excluding aircraft, considered a proxy for business spending, decreased 5.8%, compared to projections of a 10.0% drop, while the prior month’s figure was revised unfavorably to a 1.1% decline.

The May Kansas City Fed Manufacturing Activity Index improved but remained solidly at a level depicting contraction (a reading below zero). The index rose to -19 from April’s -30 reading, versus forecasts of an improvement to -21.

Pending home sales fell 21.8% m/m in April, versus projections of a 17.3% fall, and following the unrevised 20.8% tumble registered in March. Sales were 34.6% lower y/y, compared to the expected 28.7% decline. Pending home sales reflect contract signings and are a gauge of the pipeline of existing home sales.

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