Stocks were whacked today as the US proposed more tariffs on China to counter the tariffs which were counter to our tariffs. Asian markets fell hard on the news and it appears Chinese investors are taking the biggest hit in this battle of wills as Chinese stocks fell over 3% while US markets were off by about 1%. One analyst on CNBC noted that buying the dip in each of the recent trade war selloffs has resulted in decent returns. While this may or may not be true it pays to play it safe and smart. At the close the Dow was off 287 at 24,700 on heavier trading volume. Boeing, Cat and other big manufacturers were lower while banks and utilities were up.
First Trust economist and member of the Westport Mafia Brian Wesbury reported that US housing starts jumped 5% in May and are now up 20.3% over the past year. This reading shows we are building houses at a 1.35 million annualized rate which is an 11 year high. While these numbers are strong the rate of growth is expected to slow somewhat due to labor shortages, rising interest rates and lumber prices. The NAHB estimated that more expensive lumber is adding an additional $9,000 to the cost of each new home. Construction trends show that single family home construction continues to outpace multifamily construction and in terms of regions, the Midwest saw the biggest growth trend surging 62% while other regions were flat or down. Looking forward, the report showed that permits for future construction fell 4.6% but strong labor markets continue to support a positive outlook.
Yesterday, CNBC had an article about how Russia was selling its holdings of US Treasury debt. The article noted that Putin’s central bank had cut its holdings of US Treasury bonds from $20 billion to $10 billion and expressed worry that this means no one wants to own US debt anymore. Seriously? Bank of America has over $500 billion in short term liquidity and that’s just one of four big US banks! I am not sure that Russia dumping $10 billion is that big of a deal. Anyway, speaking of US banks, the annual stress test is due out soon and the gurus at Bloomberg are expecting US banks that pass the stress test to pay out excess earnings in the form of dividends to the tune of $30 billion smackers or 3X the value of what Russia just sold! Maybe putin should ask Valintine at Duke & Duke for advice about going long US banks.