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David Becker

US stocks were higher on Friday, with the Nasdaq leading the broader markets higher and the Dow Industrials the lager. Better than expected trade data from China on Friday, helped buoy riskier assets. For the week the Nasdaq composite climbed 1.6% while the S&P 500 increased 0.85%.

US Yields Surge

US yields continued to rise, with the 10-year yield rising 22-basis points for the week. The stronger move in US yields buoyed the US dollar putting downward pressure on gold and precious metals miners. Sectors in the S&P 500 index were mixed. Healthcare and Technology were the best performing sectors, Utilities bucked the trend. The robust rise in US yields put downward pressure on utilities, which generally benefit as rates move lower. For the week the XLU ETF which is a sector ETF with utilities in it dropped 3.6%.

The strength in US yields has been driven by better than expected data released throughout the week. The downward slide in yields came as the Fed announced that the bar for additional rate cuts will move higher. This was followed by better than expected jobs data and solid ISM manufacturing and service. If the Fed is not expected to cut rates any further the back end of the yield curve can begin to rise and generate a normal curve term structure.

Stocks were mixed at the open and drifted for most of the session until President Trump announced that he had not yet agreed to lift tariffs as part of the phase 1 deal. The market has been buoyed and has continued to rise as expectations that a trade deal was baked in the cake. If President Trump backs out because he does not think he is getting the deal he wants, the markets will move lower.


Chinese Data Surprises

China revealed on Friday that both better than expected import and export data lifted trade to project better GDP.  Both exports which came in at-0.9% year over year and imports which came in at -6.4% year over year came in better than expected.  The overall trade balance increased to $42.8 billion, around $2 billion higher than expected. Trade with the US continues to shrink the rate at which trade deals have to decline are beginning to decelerate.

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