Market Morning: Day Off Doesn’t Help Wall Street, Tariffs Failling, Costco Signalling Inflation

Market Morning

Wall Street’s Day Off Doesn’t Help Equities

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Trading took a rare 24-hour hiatus yesterday to commemorate the passing of former United States President George Herbert Walker Bush, who died at age 94 last weekend. Traders had hoped that the day off would recharge buyers’ batteries after a dramatic 800-point selloff in the Dow on Tuesday, but it was not to be. Futures were initially up, but the plummeted once again, with market commentators blaming the US arrest of the chief financial officer of private Chinese telecom giant Huawei, Meng Wenzhou. The logic being that the US arrest of a Chinese business leader may be a bad signal for the future of trade relations between the two countries. Earlier this week, President Trump had reportedly reached a landmark deal with his counterpart Xi Jinping, to which the markets cheered and we saw a one-day rally, but that has since fizzled. The Nasdaq (NASDAQ:QQQ) is set to open up down triple digits, and the S&P 500 (NYSEARCA:SPY) down close to 1.5%.

Trump Tariffs Fail to Balance Largest Chinese Trade Deficit Ever

Hardly news but necessary to report, tariffs aren’t working to balance US trade deficits. In fact, they seem to be making them worse. Soybean exports have continued to fall, thanks mostly to the surge in soybean exports in preparation for the Trump tariffs which triggered retaliatory tariffs from the Chinese, prompting soybean exporters to frontload their exports before the trade war officially got underway. The trade deficit with China in October has ballooned to a record $43.1 billion. The general trade deficit with the world is now at its highest in a decade, having risen now for 5 straight months, about the same time that the trade war started. Trump has meanwhile styled himself the “tariff man,” which, while it has a nice ring to it, probably won’t narrow the trade deficit.

Costco Either Strong or Signaling Inflation

Costco (NASDAQ:COST) reported very strong data today, with same store sales surging 9% year over year for the quarter, pushing the stock higher by about 2% at time of writing. The encouraging numbers could be a demonstration of the power of wholesale retailing, but it could also be evidence of stronger inflation than government data is currently picking up. This depends on whether the data reported is strictly a dollar amount or whether it takes into account units sold. In any case inflation pressures are on the rise and this is being revealed at the retail level in many outlets. The next Consumer Price Index release is scheduled for December 12 at 8:30am, one day after the Producer Price Index, which should give investors a better idea of what is going on at the consumer level.

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