Stock Market Update

[BRIEFING.COM] The stock market closed higher across the board. The major equity indices settled off session highs with gains ranging from 0.6% to 1.1%. The market was fueled by some pleasing developments in the trade situation, along with President Trump saying to buy stocks now.

The Trump administration announced a trade deal with the UK, fueling optimism that deals will be reached with other countries and that the tariffs may be less impactful than feared on the global economy. 

Commerce Secretary Howard Lutnick said the 10% baseline tariff will remain in place (as expected), adding that the UK will purchase $10 billion worth of Boeing (BA 191.70, +6.14, +3.3%) jets.

During the Q&A with reporters, President Trump said the US is very close to making additional deals with other countries, specifying that tariffs on China "could be" lowered if this weekend's meeting goes well. Mr. Trump added he may speak with President Xi after the meeting.

Late afternoon reports indicated that the U.S. is considering lowering tariffs on China to 50% next week before long trade deal talks begin, according to the NY Post.

Treasuries faced selling pressure today, leading the 10-yr yield to settle ten basis points higher at 4.37%, and the 2-yr yield to settle ten basis points higher at 3.89%. Factors that influenced this price action included a disappointing Productivity report for Q1, which showed a larger-than-expected decrease in productivity, coupled with a bigger-than-expected increase in Unit Labor Costs.

Also, the New York Fed released its April Survey of Consumer Expectations, showing no change in year-ahead inflation expectations (3.6%) while the three-year outlook increased to 3.2% from 3.0%. The five-year outlook decreased to 2.7% from 2.9%.

On a related note, the U.S. Treasury sold $25 billion in 30-yr bonds to weak demand.

• Dow Jones Industrial Average: -2.8% YTD
• S&P 500: -3.7% YTD
• S&P Midcap 400: -5.5% YTD
• Nasdaq Composite: -7.2% YTD
• Russell 2000: -9.1% YTD

Reviewing today's economic data:

• Weekly Initial Claims 228K (Briefing.com consensus 238K); Prior 241K, Weekly Continuing Claims 1.879 mln; Prior was revised to 1.908 mln from 1.916 mln
  • The key takeaway from the report is the step down in initial jobless claims -- a leading indicator -- from the prior week, as it leaves initial claims at a level that is consistent with a fairly solid labor market and far from recession-like levels.
• Q1 Productivity-Prel -0.8% (Briefing.com consensus -0.4%); Prior was revised to 1.7% from 1.5%, Q1 Unit Labor Costs-Prel 5.7% (Briefing.com consensus 4.0%); Prior was revised to 2.0% from 2.2%
  • The key takeaway from the report is the jump in unit labor costs stemming from the weak productivity, although the first-quarter earnings reports in aggregate have not conveyed any strong profit margin pressures as a result of higher labor costs.
• March Wholesale Inventories 0.4% (Briefing.com consensus 0.5%); Prior 0.3%

Looking ahead to Friday, there is no US economic data on the calendar.