US Stock Market Overview – Stocks Surge as Trump Flinches

CPI rises by more than expected
David Becker

US stocks rallied as President Trump was the first to blink in a treat to issue additional tariffs on China. In backing off on China tariffs Tuesday, President Donald Trump showed just how much pain the US economy could tolerate. Markets rallied on the announcement by the US Trade Representative office that certain items were being removed from the new tariff list. Apple shares surged on the news rising nearly 5% at its highs for the session. Energy shares surged higher as crude oil rallied more than 4% on Tuesday. US yields rebounded after hitting fresh lows for the cycle. US consumer prices rose more than expected reversing a 2-month decline. All sectors in the S&P 500 index were higher, led by technology and cyclicals. Utilities were the worst performing sector in a robust tape.

US CPI Rises More than Expected

US Consumer prices rose more than expected in July as gasoline reversed a two-month decline. The consumer price index was up 0.3% for the month, against expectations for a 0.2% increase. Gasoline rose 2.5% while shelter costs increased 0.3%. Excluding food and energy costs, the index was still up 0.3%, which was in line with estimates. Year over year core inflation rate increased 2.2%, while the headline number was up 1.8%.

CBS and Viacom Agreed to Merge

CBS and Viacom after 3-years of negotiating have agreed to merge. The new company will be called ViacomCBS, and Viacom’s CEO, Bob Bakish, will be the CEO of the combined company. The combination joins two media companies controlled by Sumner Redstone’s National Amusements. A merger will add movie studio Paramount Pictures, cable networks such as Comedy Central, MTV, Nickelodeon and BET.

Trump Was the First to Blink

The markets took Tuesday’s announcement as a sign that despite the White House’s claim that China would bear the brunt of tariff impacts, the trade war was indeed hurting US consumers. Trump told reporters that he postponed tariffs for the Christmas season in case it had an impact on shopping and the delay would help a lot of people. China on the other hand was digging in. It announced last week that it would not resume buying US agricultural products, despite assurances otherwise by Xi to Trump at the June G-20 summit.

European ZEW Survey Slips

European ZEW sentiment data was reported on Tuesday which disappointed investors.   In Germany, current situation tumbled to -13.5 versus expectations that it would move to -6.3, while expectations fell to -44.1 vs. -28.0 expected.  Eurozone expectations sank to -43.6 from -20.3 in July.  These readings suggest the economy continues to weaken in Q3.  The ECB is now set to ease rates which would could weigh on the Euro.

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