The Market Today

Online State Sales Tax Affecting Inflation More Than Tariffs


by Craig Dismuke, Dudley Carter

TODAY’S CALENDAR

More Job Openings Than Unemployed Persons Likely to Persist: At 9:00 a.m. CT, the June Job Openings report is expected to show openings continue to moderate from 6.638 to 6.625 million.  With the number of unemployed persons down in 6.280 million in the July jobs report, job openings will have to crater in the June JOLTs data in order for the unique phenomenon of more job openings than unemployed persons not to persist.  At 2:00 p.m. CT, the June Consumer Credit report is expected to show credit expand by another $15.0 billion.

 

TRADING ACTIVITY

Yesterday – Stocks Gained, Longer Treasury Yields Fell, Dollar Touched a 12-Month High: U.S. stocks gained Monday, despite a drag from other global indexes, as internet retailers led the consumer discretionary sector to a first place finish and tech companies rallied to close right on their heels. Amazon was up more than 1.3% and shares of Netflix gained 2.3%, but the focus was on the 4.5% rally in shares of Facebook Inc. The company’s value rose the most in a single day since April 26 after the WSJ reported Facebook had asked major U.S. banks for customer financial information that could be used to enhance financial services on its social media platform. Eight of the remaining 10 sectors also gained, lifting the S&P 500 as a whole up 0.4%. The Dow added a smaller 0.2% while the Nasdaq outperformed at 0.6%. As stocks recovered, the Treasury curve pushed off its lows reached around 10 a.m. CT. Yields were higher in the overnight session but tracked the global trend lower in early U.S. trading. However, as stocks gained momentum that reversed. For the day, the 2-year yield closed hardly changed at 2.65% while the 10-year ended 0. 6 bps lower at 2.94%. Also catching the attention of a few market reporters, the U.S. Dollar, helped out by weakness in the British pound, gained over 0.2% to a more-than-12-month high.

 

Overnight – Sovereign Rates Rise as Global Stocks Recover: Yesterday’s U.S. equity gains lifted global spirits overnight, helping markets across Asia and Europe to more than recover their previous day’s losses. Chinese shares snapped back nearly 3% to lead the way higher in Asia while more equitable national gains have pushed the Stoxx Europe 600 0.6% higher. The momentum has come full circle back into U.S. futures trading, where the Dow and Nasdaq look set to rise around 0.3% and the S&P 500 has gained 0.2%. The S&P 500 needs just under an 0.8% gain to finally overtake its previous all-time high from January 26.  Energy companies were near the top of the major global indexes as the sector benefited from a price improvement across energy commodities. Brent crude was up 1.4% and at a six-day high after the U.S. announced it was re-imposing sanctions on Iran. Iranian oil exports could be targeted in a second round of sanctions slated for early November if the country doesn’t comply with the first wave of U.S. demands. After moving mostly lower on Monday, core global sovereign yields have returned modestly higher. The 10-year yields in Germany and France were both up 1.3 bps. The 2-year Treasury yield was 1.2 bps higher, the 5-year yield was up 2.0 bps, and the 10-year yield had added 1.5 bps.

 

NOTEABLE NEWS

Inflation-Talk Ahead of July Producer and Consumer Price Indices: With July’s Producer Price Index (Thursday) and Consumer Price Index (Friday) due out later this week, there is plenty of focus on inflation this week.  The WSJ notes some interesting trends in a morning journal, saying “Everyone wants to know how tariffs are affecting costs for business and consumers. … But you know what may be an even bigger deal (for now)? The Supreme Court decision authorizing states to make online retailers collect sales tax. The government estimates the decision will generate $8 billion to $13 billion in additional taxes.” This would lift Core PCE 0.07% while the currently implemented, new tariffs on steel, aluminum, washing machines, solar panels, and Chinese imports would only drive PCE up 0.03%, according to research from Morgan Stanley.  Also notable, there are more cost pressures on certain industries from tariffs.  According to the most recent producer price report, lumber prices are up 22% YoY while iron and steel prices are up 13%.

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