Stocks Fall, Then Rise on Trade News

Dec. 6, 2019 - Stocks managed to claw their way back to the break-even mark this week after losing ground to start the week. It should come as no surprise that the trade situation with China was the driver for both moves.

To start, President Trump said he was comfortable waiting until after the 2020 election to finalize a trade deal with China, Meanwhile, administration officials also said that a new round of tariffs set to take effect on Dec. 15 would be enforce if there was no agreement with China at that date.

After two down days to start the week, Wednesday saw a number of reports, all citing unnamed officials, that progress was being made between the two sides. Versions of that narrative persisted through the end of the week, with Friday seeing new reports that China is considering waiving tariffs on some pork and soybean imports from the U.S.

An important, but often unmentioned caveat about those Chinese pork imports is that African Swine Fever has swept through much of the world, including China, recently causing the culling of at least half of China's hog population. It's possible that this is actually a goodwill gesture, but seems just as possible that China is facing a drastic shortage of a leading protein source at a time when the government really doesn't need to add any new reasons for people to be unhappy with the government.

With the Dec. 15 tariff deadline getting closer every day, the market could easily start to retreat again if some concrete progress toward a deal isn't produced soon.

Elsewhere in the economy, November's jobs report was released this morning. The headline numbers were better than expected and wage growth also ticked higher. With the Federal Reserve's new stated policy of waiting until measurable inflation appears to raise rates, this report is an unabashed good for the market, as it shows the economy is still strong and there's no reason to worry about a rate hike.

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