Stocks surged higher after CNBC hosted “anti-guru” David Stockman who said markets were set to fall. David is a huge contrarian indicator (consistantly wrong) and his comments helped push stocks higher. Banks led the way as did manufacturers like Boeing. Utilities were weak as the prospect of higher interest rates and a stronger economy is causing traders to rotate from defensive positions to more growth oriented sectors. At the close the Dow was up 346 on heavy trading volume to 25,146. Both IBD and BTS indicators are green.
The European Central Bank indicated it might back off on the asset purchase program which would be the first step towards tighter monetary policy. This move is also an indication that economic growth in Europe is stable and that inflation is on the rise. This news helped push US interest rates higher.
The latest trade war rumors show that while Mexico and Canada are looking to put tariffs on US agriculture products, China continues to negotiate and has recently offered to purchase nearly $70 billion of US farm, manufacturing and energy products if the Trump administration abandons its threat for $50 billion on duties of Chinese products. The White House, which is looking to reduce its trade deficit with China by $200B, has said it plans to move ahead with the tariffs shortly after June 15, as a way to pressure Beijing to make more sweeping changes in its economy. The important thing to remember is that negotiations are ongoing so it is wise to await the final details before considering any portfolio adjustments.