Markets today meandered like a stream through a meadow as stocks drifted back and forth on light trading volume ahead of the Labor Day weekend. The Dow closed out the trading week with at 26,403 up 41 points. August 2019 came to a close with a monthly decline of about 1.7%. It was a wild month in terms of market volatility. For the year, the Dow is up 13% which is not bad considering all the tweets and global uncertainty.
Sunday Sept. 1st could be a moment of truth for the US China trade war if new 15% tariffs slip into place on $110 billion in goods. While China said it will take a wait and see approach the gurus think this move is designed to A) not egg Trump on and B) to encourage him to issue a stop order on the Sept. 1st tariffs and not “cross the Rubicon” so to speak.
The latest US GDP reading came in at 2% which was less than the 2.1% that the gurus had expected. Most economic sectors within the report came in lower but one segment, personal consumption, rose to 4.7% which is the highest reading since 2014. Based on this latest GDP estimate, economist expect the Federal Reserve to cut interest rates by 0.25% in September.
According to a report from Bank of America, the US steel industry is once again struggling but for different reasons than before. After President Obama hit Chinese imported steel in early 2016 with massive tariffs and President Trump basically doubled down on this strategy, US steel companies began modernizing and investing back into plant property and equipment. That in turn led to capacity going back up over 80% but with increased production and more efficient mills the steel markets now appear to be oversupplied and as a result prices are falling, and steel companies are laying off again. B of A thinks we could be in for the “Mother of all price wars” and this certainly has been reflected in the price of US steel stocks which are trading at 52-week lows.