Your Monday Market Blip 8/27/18

Your Monday Market Blip 8/27/18

Stocks got an early morning boost when it was announced that the US and Mexico had reached a deal to replace the 25-year-old NAFTA trade agreement with a new plan. The markets liked the news and shot higher with the Dow gaining 259 on heavy trading volume to 26,049. Both the NASDAQ and S&P 500 continued to march into record territory.

The trade deal with Mexico appears to be well received and early indications are that it keeps steel and aluminum tariffs in place while not capping imports of light vehicles. China might not like this news since it has been trying to get steel into the US, in the words of travel guru Rick Steve’s “through the back door”, but what the heck. The proposed trade deal will be reviewed every 6 years and while it must be ratified by congress it appears to be a good first step. The next part of the process will be to bring Canada into the talks. One issue that both the US and Canada have with Mexico is over wage disparity. It will be interesting to see how this is addressed, if at all, in the final agreement.

US durable goods orders dropped 1.7% in the latest reading thanks in large part to a dip in airline orders. If you strip out the transportation sector, which is volatile, durable goods were up 0.2%. Over the past year durable goods orders are up 8% which is a solid reading.