Pre-markets rebound again, trade deficit hits new record – October 5, 2021
Tuesday, October 5, 2021
Pre-stock futures are back on Tuesday morning, after another dark day in the red Monday, especially for the highly technical Nasdaq, which fell another 2% + on its first trading day of the month. week. With some of the hottest names in tech now double digits from their all-time highs, the bargains seem to be in order. The Dow Jones is +150 points at this time, the S&P 500 is +20 and the Nasdaq is +45 points.
A report released this morning does nothing to shake things up on buying stocks, but could have longer-term implications. This is the US trade deficit for the month of August, which has fallen (or “increased”, depending on your perspective) to its widest margin on record: -73.3 billion dollars, far from the expected -70.6 billion dollars and the July print revised downwards to -70.3 billion dollars. It is also the third consecutive month for less than $ 70 billion, also for the first time in history.
Exports, led by natural gas, totaled $ 213.7 billion, tempered by lower totals for auto parts, corn and travel. Imports rose +1.47% to a record high of $ 287 billion as our gap widened between our major trading partners: China added + $ 3.1 billion to 28.1 billion billion dollars, and Canada was + $ 1.4 billion to $ 5.1 billion. Since the turn of the 21st century, the US trade deficit has for the most part followed a steep downward trajectory, except for the initial recovery from the Great Recession more than a decade ago.
Speaking of China, another major real estate developer appears to be in financial trouble. Fantasia, a Shenzhen-based luxury developer, has failed to repay a nearly $ 206 million bond and another $ 109 million loan to a company interested in repurchasing many of Fantasia’s assets. The news follows the fate of Evergrande last week, an even larger Chinese real estate developer, who also reported defaulting on a major loan payment.
In the past, such failures would likely have been corrected by the Chinese central government, but President Xi Jinpeng has started to more aggressively employ a different strategy against fast-growing business entities in the country. That is, it is now taking a harder line against big companies that take big risks. Some say this portends economic hardship in China, which is worse than it is said. Others, like the New York Times this morning, see it as President Xi’s takeover.
Following our opening bell this morning, September readings for both PMI and ISM services will be recorded, with expectations in line (PMI) and slightly lower (ISM) than August numbers. Both surveys should sit comfortably ahead of the benchmark 50, which represents growth. The question is: how far, how fast is the service sector growing in the United States? Last week’s manufacturing PMI and ISM numbers were a bit warmer than expected.
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