U.S. and World News
Another round of trade negotiations will take place from June 2nd until June 4th as a U.S. delegation travels to China. China has pledged to reduce the import tariff on passenger vehicles to 15% from 25%. Another factor has been added to the trade negotiations after President Trump has announced an investigation under section 232 of the Trade Expansion Act of 1962 which would allow the president to restrict imports or levy tariffs on foreign goods that excessively displace domestic goods or cause substantial unemployment. China responded by expressing their opposition to the abuse of national security clauses, but will firmly defend their rights and interests.- President Trump canceled the planned June 12th meeting in Singapore between himself and Kim Jong-Un yesterday after a nasty war of words took place over its nuclear weapons program. This morning, foreign journalists watched as North Korea blew up tunnels leading to its nuclear facilities and President Trump expressed optimism about the summit between the two leaders taking place in the near future. North Korea remains under extremely tough international sanctions to pressure the country to end its nuclear weapons program.
Markets
- The markets rose slightly higher this week. The S&P 500 gained 0.33% this week and closed at 2,721.33. The Dow Jones rose 0.18% and closed at 24,753.09. Year to date, the S&P is up 2.57% and the Dow Jones is up 1.07%.
- Yields dropped significantly this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 2.77% and 2.93%, respectively.
- The spot price of WTI Crude Oil plummeted 5.31% this week and closed at $67.58 per barrel. Year to date, Oil prices are up 12.43%.
- The spot price of Gold increased by 0.62%, closing at $1,301.09 per ounce. Year to date, Gold prices are down -0.13%.
Economic Data
- Initial jobless claims rose 11,000 once again this week to 234,000, a seven-week high. The largest increases were in California and Pennsylvania. The four-week moving average moved higher by 6,000 to 220,000. The pace of layoffs still remains very low.jobless claims rose 11,000 once again this week to 234,000, a seven-week high. The largest increases were in California and Pennsylvania. The four-week moving average moved higher by 6,000 to 220,000. The pace of layoffs still remains very low.
- Sales of new single family homes declined by 1.5% in April to a seasonally adjusted rate of 662,000 units, below expectations of 680,000. The prior 3 months were revised lower by a net 41,000.
- New orders for durable goods declined by 1.7% in April versus expectations of a 1.3% drop led by defense aircraft orders.
- Durable goods ex-transports rose 0.9% versus expectations of a 0.5% increase.
- Core capital goods rose 1.0% in April, exceeding expectations of a 0.7% increase.
- The University of Michigan index of consumer sentiment fell by 0.8 points versus expectations of an unchanged reading.
Fact of the Week
- In 1954, economist Armen Alchian was able to figure out the secret materials being used to create the hydrogen bomb. While working at RAND, Alchian observed the stock performance of many different marterials companies, and noticed that the Lithium Corp. of America had significantly outperformed other material names in the six months leading up to the successful test of the H-bomb. Alchian wrote an internal memo at RAND announcing his discovery, and was told to withdraw the memo two days after its publication. (Source: Library of Economics and Liberty)
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After witnessing ongoing joint military drills between South Korea and the United States, North Korea has cancelled planned discussions with South Korea and threatened to cancel the scheduled meeting with the United States on June 12th. Kim Jong-un expressed displeasure with having to unilaterally abandon its nuclear program. Vice Foreign Minister Kim Kye-gwan stated “If the U.S. is trying to drive us into a corner to force our unilateral nuclear abandonment, we will no longer be interested in such dialogue and cannot but reconsider our proceeding to the North Korea-U.S. summit”. The United States has stated that it continues to plan for the scheduled meeting on June 12th.
California has voted unanimously to require that nearly all new homes and residential buildings smaller than four stories built after January 1st 2020 have solar panels. This is estimated to add between $8,000 and $12,000 to building a home. The CEC also estimated that mortgages will increase on average by $40 per month and savings on utility bills will be $80 per month.
Earlier in the week, a series of earthquakes on Hawaii’s Big Island sparked the eruption of the Kilauea volcano on Thursday evening. Nearly 1,500 people were forced to evacuate the area and lava is flowing through the streets of the Leilani Estates subdivision while residents are being sheltered at two community centers. On a Honolulu television station, a resident stated that “It sounded like if you were to put a bunch of rocks into a dryer and turn it on as high as you could.” The fire department has detected sulfar dioxide gas in the evacuation are at extreme levels. Kilauea is 212 miles southeast of Honolulu and is considered the most active volcano in Hawaii.