April 17 – It’s the final trading day ahead of the three-day Easter holiday weekend, with the markets closed tomorrow for Good Friday. We saw a big selloff in the tech sector yesterday after the White House announced restrictions on the export of semiconductors, while we saw that rotation reverse somewhat overnight, with the Dow dragged down by United Health Group due to an earnings miss. All of this continues to represent a volatile consolidation above the lows set earlier this month when President Trump first announced his reciprocal tariff policies. President Trump uses chaos to create negotiations. The markets don’t like chaos, and they are reacting to that. Now President Trump needs to reassure the markets, and the U.S. consumer that all will be well in the end. The headlines will likely continue through the three-day holiday weekend when the markets are closed, so we’ll likely see more positioning for that today.
The European Central Bank lowered its benchmark interest rate 25 basis points due to the uncertainty of the tariff war this morning, while the Federal Reserve remains in a holding pattern. The VIX is trading near 31 at this hour, while the dollar index is trading near 99.4 as it consolidates just above last Friday’s three-year low. Yields on 10-year Treasuries are trading near 4.29%, while yields on 2-year Treasuries are trading near 3.78%. Crude oil prices are 1% higher after President Trump increased sanctions on those buying Iranian oil, while the grain and oilseed markets were firmer as well.
First-time claims for unemployment benefits fell to 215K in the week ending April 12, down from 224K the previous week, and down from analyst expectations of 225K. The four-week moving average fell to 220.75K claims, down from 223.25K the previous week. Continuing claims for the week ending April 5 rose by 41K to 1.885 million, essentially reversing the previous week’s big drop. The four-week moving average for continuing claims rose to 1.867 million, up 1K from the previous week. Initial claims filed in the week ending April 5 by former Federal civilian employees totaled 542, up 34 from the previous week, while there were 7,192 continuing claims filed by this group in the week ending March 29.
Housing starts slipped to an annualized rate of 1.324 million units in March, down from 1.494 million in February, and below analyst expectations of 1.420 million. However, permits for new starts rose to an annualized rate of 1.482 million in March, up from 1.459 million in February and above expectations of 1.450 million. Other data released this morning showed the Philadelphia Fed manufacturing index dropping to -26.4 in April, down from 12.5 in March and below analyst expectations that it would slip to 6.7.
President Trump dropped in on trade negotiations with Japan on Wednesday. President Trump needs a win on the negotiation front to restore some of the confidence of the consumer and of the markets, and he needs it soon. Preferably that win would be a negotiated deal with a major trading partner like Japan and/or South Korea. Japan is one of the first countries to kick off negotiations with the Trump Administration, and U.S. Treasury Secretary Scott Bessent hinted that the first country to negotiate a deal can get the best deal. But from the Trump Administration’s perspective, they want the first deal to set the bar for the rest of the negotiations, so they’ll want a deal that has significant cuts in tariffs and other non-tariff restrictions. Perhaps that’s why Japan’s lead negotiator suggested that they had the 90-day pause to do a deal, and they weren’t necessarily interested in being in a hurry to do something quicker. Seems that perhaps they’ve read “The Art of the Deal” as well. Trade deals inked during Trump 1.0 were largely negotiated by Trump’s trade team, but President Trump is personally getting involved with the negotiations this time – something that he takes pride in doing. President Trump indicates that he had a productive conversation with President Sheinbaum of Mexico, and Italy’s prime minister is scheduled to be in Washington, D.C. to meet with Trump today. Vietnam was in town last week, while South Korea’s finance minister is scheduled to be in D.C. next week. Meanwhile, the clock is ticking with 82 more days left in the pause.
China made a subtle move yesterday that received little attention, but that may be a quite significant step toward resolution of the current trade war. China replaced its lead trade negotiator. The new negotiator Li Chenggan participated in the Phase One negotiations during Trump 1.0, and he has extensive overseas experience as China’s representative at the World Trade Organization. He replaced the lead negotiator from those Phase One negotiations who had a reputation as a hard-nosed negotiator. Observers believe that this signals movement toward negotiations by Beijing amid hopes that it can be done within the WTO framework. This comes as data shows a 30 – 60% drop in container cargo bookings out of China to the United States over the next three weeks, while bookings elsewhere in Asia were down 10 – 20% due to the tariffs. Yet, shipping traffic for much of the rest of Asia surged as buyers took advantage of the 90-day pause.
Weekly export sales were solid for corn and soybeans again this morning, providing a boost for prices. A wetter pattern is setting up for the Midwest that will refill soil moisture profiles in some previously dry areas, but it will also delay planting. That’s not a problem yet, but that could change if the wetness continues deeper into May. Meanwhile, traders will be watching rains in the Plains closely this weekend to see if they can chew into drought plagued areas of the region. Meanwhile, we continue to see modest increased money flow support for the grain and oilseed sector, at least for now.
