September 11, 2018

Stocks gapped lower at the open but quickly turned around. The Dow is currently up 136 pts and the SPX is up .46%. Energy, tech and telecom are the best-performing sectors, up 1% in early trading. Apple (AAPL) stock is up 1.9% in front of its new product event tomorrow. European stock markets closed about flat and most of Asia was modestly lower overnight. Despite the fact that China’s government is directing traders to buy stocks hand-over-fist, the Shanghai Composite Index is still down 20% in local currency terms this year. Most commodities are lower today, save oil. WTI crude oil prices are up 2% to $69/barrel. Bonds are trading slightly lower on the day. The 5-year Treasury yield is up around 2.87% and the 10-year yield is up to 2.97%. Rates want to move higher.

The cloud of uncertainty surrounding US trade policy just got thicker. President Trump recently said his administration has identified another $267bil of Chinese imports to tax “on short notice if I want.” US businesses that depend on these imports are warning retailers that prices of everything from computer equipment to shoes to home improvement goods could rise by 10-25% soon. This worst-case scenario could end up slowing US consumer spending, which is currently very healthy. But, of course, nothing is certain. And as CNBC’s Josh Brown said of guessing at Mr. Trump’s trade policy whims, it’s a “clown game.”  

July’s JOLTS (Job Openings & Labor Turnover Survey) report revealed that US job openings have hit record levels. The number of open positions is up around 6.9 million. For context, the 5-year average is around 5.5 million. Openings have really accelerated since the end of 2017. In addition, the number of workers quitting to find another job position is now at a 17-year high. High quit rates usually signal confidence on the part of workers that jobs are plentiful and pay may be higher elsewhere. Make no mistake, wages are rising.

NFIB’s Small Business Optimism index also hit a record high this month. Small business owners, buoyed by lower corporate tax rates, boosted investment and hiring plans. The survey did reveal that companies are having a hard time finding qualified workers. In fact, Bloomberg notes “poor labor quality remains their most important problem.”


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