Weekly Closing Numbers: Mexico Tariffs Another Concern

Market Direction: BEARISH alert issued 5/23/2019

Will the stock market continue to decline? 

Vote BULLISH (Up) or BEARISH (Down) in the upper right side bar, the current stock market direction weekly closing numbers. Leave a comment. Now for the news…

The economy

U.S. stocks, Treasury yields, and oil prices all dropped on Friday after President Trump surprised the market by threatening to impose a 5% tariff rate on all goods imported from Mexico. Friday's 1.3% decline in the S&P 500 sent it below its 200-day moving average (2776) and extended its weekly decline to 2.6%.

The Dow Jones Industrial Average (-1.4%), the Nasdaq Composite (-1.5%), and the Russell 2000 (-1.4%) extended their weekly losses to 3.0%, 2.4%, and 3.2%.

The 5% tariff rate will go into effect on June 10 and will increase incrementally during the summer to reach 25% on Oct. 1. The White House could remove these tariffs altogether if Mexico makes a concerted effort to curb the flow of undocumented migrants entering the U.S.

The news catalyzed de-risking efforts, leading to eight of the 11 S&P 500 sectors finishing with losses over 1.0%. The utilities (+0.5%) and real estate (+0.8%) sectors finished higher amid a steep drop in U.S. Treasury yields.

Another trade dispute on top of a U.S.-China trade war with no clear end in sight fueled ongoing concerns that trade tensions will lower economic, and earnings, growth prospects.

China added to these fears after it announced that it is drafting a list of unreliable foreign entities that harm the interests of its firms, increasing speculation about Chinese retaliation against the U.S. On a related note, China's manufacturing sector slipped into contraction in May.

Global growth concerns were transparent by the 5.2% drop in WTI crude ($53.48/bbl, -$2.92) and by investors seeking safety in a crowded U.S. Treasury market. The 2-yr yield dropped 12 basis points to 1.94%, and the 10-yr yield dropped nine basis points to 2.14%. The U.S. Dollar Index fell 0.4% to 97.76.

In corporate news, shares of General Motors (GM 33.34, -1.48, -4.3%) underperformed on the Mexico tariff threat. Dell Technologies (DELL 59.55, -6.86, -10.3%), Gap (GPS 18.68, -1.92, -9.3%), and VMware (VMW 176.98, -14.11, -7.4%) disappointed investors with their earnings results, while Uber (UBER 40.41, +0.61, +1.5%) pleased investors with its results.
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The market direction weekly closing numbers for the indexes this week compared to the initial BEARISH recommendation closing numbers:

Stock Market Closing Numbers
compared to Recommendation Numbers
	5/23/2019	5/31/2019	Difference
Dow Jones	25,490.50	24,815.04	675.46
Nasdaq	7,628.28	7,453.15	175.13
S&P 500	2,822.24	2,752.06	70.18

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