Tariffs for Mexico. On Thursday night, President Trump said the U.S. will impose a 5% tariff on all imports from Mexico effective June 10. He also noted the tariff rate will increase 5% each month (to 25% on October 1) until Mexico curbs its illegal immigration into the U.S. Mexico is the U.S.’ third-largest trading partner, and 5% tariffs would generate about $17 billion in additional costs for the U.S. economy per year (based on $346.5 billion in Mexican imports in 2018). Still, the past several months have shown that global uncertainty from trade can have a greater impact on economic health than tariffs alone. These tariffs could also put the United States-Mexico-Canada Agreement (USMCA) deal at risk.
S&P 500 poised to break 200-day moving average. With U.S. equities markedly lower in early trading, the S&P 500 Index looks poised to break below the 200-day moving average, a closely watched technical indicator. However, investors should be aware that moving averages are often better used for identifying the direction of the underlying trend as opposed to providing specific support and resistance levels, especially when there is no primary trend in the market. Since the sell-off began in October the S&P 500 has crossed above or below the line ten times, and the Dow and Russell 2000 are already below their respective 200-day moving averages. We see more significant support for the S&P 500 near the 2600 level (about 5% lower), and we think a break of the 200-day moving average may be just what the market needs to wash out weak hands.
A second glance at first-quarter GDP. A second glance at first-quarter gross domestic product (GDP) this week provided respite for investors fixated on negative headlines. Although headline growth was revised down, it was still the biggest first-quarter GDP gain since 2015, showing the U.S. economy remained resilient against trade and political headwinds. On the LPL Research blog later today, we’ll dig into the first revision of last quarter’s surprising GDP report.
- Personal Income (MoM Apr)
- Personal Spending (MoM, Apr)
- Core PCE (MoM Apr)
- University of Michigan Sentiment Index (May)
- Japan Consumer Confidence Index (May)
- Germany CPI Report (Preliminary, May)
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