Shifting trade expectations give pause

The splendid little trade war that Wall St. imagination conjured is slipping behind a veil. And instead there is the possibility of a drawn out battle that no one wins. It's happened in about a week. Perhaps more telling, the war over tariffs is taking on the tenor of a war over technology. The Dow suffered its 5th straight week of decline - something that hasn't been seen for about eight years.Treasury yields are falling. Various measures have the economy slowing. Technology has lost its mojo as Tesla stock and convertibles (bonds) decline and after some worse than lackluster IPOs. One would expect next week to be down, maybe less so for dividend spewers and staples (whither utilities and real estate, which have already buoyed). And a flight to bonds to continue. Given the Administration's penchant for the brink, one would have a hard time seeing further out - with a June G2 meeting holding more risk than opportunity. And election year offering more than its usual share of uncertainty. Morgan Stanley's  Andrew Slimmon says the T-bill activity points to the ultimate direction of the market and bravely predicts that when the S&P comes down 7% (to 2750)
then the trade uncertainty will actually be reflected in the market. Tech (eg., Apple, Google) is in upheaval and that too would have a hand in the market decline.

Fast forward to Monday We'd  conjectured: One would expect next week to be down, maybe less so for dividend spewers and staples (whither utilities and real estate, which have already buoyed). And a flight to bonds to continue

Then what happened?

Stocks fell on high volume, and it happened across the board. Two- and Ten-year notes edged up as yields declined 1.39% for the one and 0.54% for the other. But yield was up on aggregate bond index.

S&P 500 2802.39  -23.670 -0.84%

Dow -237.92 -0.93% -4.50% +2.40%

Gold Spot $/Oz 1280.08  +0.75 +0.06%

US 10-Year Bond Yield 2.253  -0.012 -0.543% 

US 2 Year Yield 2.09  -0.029 -1.39%

Barclays Global Aggregate Bond Index 492.23  +0.462 +0.09%

The drivers continued such through the week, with the S&P ending the period at 2752.06, or down over 70 points, and the Dow down to 24815, or 770 points for the week. But the last day's (Friday's) take down while 'trade related' had a different aspect. Look forward in this blog, darkly.

-- Baruch Bernard