Stocks opened the day down about 300 points as trade talks hit rough water and sparked a global selloff in stocks with the Shanghai Composite getting hit hard and leading all sellers. As the day wore on however the US markets began to recover and at the close the Dow was off only 66 points at 26,438. Trading volume ended the day lower and according the both BTS and IBD the rally and underlying fundamentals are still in place. Today’s reversal was positive market action.
President Trump tweeted that he was not happy with progress related to the Chinese trade negotiations and indicated he will slap more tariffs on China this coming Friday. Stock markets around the globe fell in response with the Chinese Shanghai composite index dropping over 5% while the US market fell about a quarter point. China is currently battling internal issues such as the African swine fever decimating its pork industry and efforts to curb pollution from its massive steel industry which has about 75 active steel mills only two of which follow environmental mitigation rules. President Xi said that China faces three main problems being pollution, poverty and financial risk. The US meanwhile is wanting strong enforcement clauses in the trade deal since in the past, China has violated just about every trade deal it signed and faces challenges from both internal and external battles over a culture of piracy.
The US Bureau of Labor Statistics reported that productivity in Q1 came in much higher than forecast rising 3.6% vs expectations calling for a gain of 2.9%. This marks the fasted gain over the past year since 2010 and is good news economically since higher productivity generally means lower inflation. While US firms increased the amount of goods and services they produce by 4.1%, the hours that workers spent on the job only increased 0.5% plus the unit-labor costs fell 0.9%. Economists liked the report.