Stocks opened lower this morning on trade war concerns. The Dow is currently down 22 pts and the SPX is down .28%. Pharmaceuticals, transports, semiconductors and banks are all down. Real estate investment trusts (REITs) are up on the better than expected pending home sales report. The consumer staples sector is higher on a strong earnings report by Procter & Gamble (PG). European markets were uniformly and sharply lower in today’s session, whereas Asian markets traded higher overnight. Commodities are mostly higher, with WTI crude oil bouncing back toward $57.15/barrel. Bonds are mixed. Long-term Treasuries are up slightly, but corporates are down on the day. The iBoxx Investment Grade Corporate Bond ETF (LQD) is showing signs of topping out after 10% run this year. As we see more signs of improving economic momentum (see below) rates could move upward, pushing bond prices lower.

US trade negotiators, led by US Trade Rep Robert Lighthizer, arrived in China to resume talks. At the same time, President Trump threw cold water on the chances of a comprehensive trade deal. He Tweeted this: “China is doing very badly, worst year in 27 – was supposed to start buying our agricultural product now – no signs that they are doing so. That is the problem with China, they just don’t come through.” As if that wasn’t enough, he continued, “They should probably wait out our election to see if we get one of the Democrat stiffs like Sleepy Joe. Then they could make a GREAT deal, like in the past 30 years…”

Pending home sales reaccelerated in June. The monthly volume of signed contracts rose 2.8% from prior month levels. The report highlights the fact that the housing market, which slowed sharply in 2018, is beginning to turn around. Low unemployment and continued job growth, as well as lower mortgage rates are responsible for the pickup in home buying activity.’s average 30-year fixed mortgage rate is back down to 3.86%--a full percentage point lower than it was last November. In addition, home price growth is slowing down. For several years, home prices have been growing faster than wages in the US. That trend has reversed. We learned today that the Case-Shiller Home Price Index slowed to 3.4% in May (compared to year-ago levels). A year ago, home prices are rising at a more than 6% pace. Personal income growth, on the other hand, is holding steady at about 4.9% in June.

The Conference Board’s survey of consumer confidence rebounded this month to levels not seen since last November. And in fact the index is back to within spitting distance of its peak for the current economic cycle. Survey questions covering both current conditions and future expectations were very strong, as were subcomponents of employment, business conditions and income. The report confirms that US consumers are over the stock market correction and government shutdown of late 2018.

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