US Stock Market Overview – S&P Hit Fresh All Time High as Geopolitical Tensions Ease

US stock prices surged on the open allowing the S&P 500 index to notch up a fresh all-time high on the close. Stocks were buoyed following this weekend’s G20 meeting were President Trump and President Xi of China decided on a truce. While the current tariffs will remain in place, both sides agreed to refrain from additional tariffs.  Geopolitical tensions were somewhat mixed as President Trump visited North Korea in an effort to reduce tensions. Iran on the other hand announced they had produced more Uranium than expected. Oil prices rallied, but settled well off the highs of the session, as OPEC announced they would keep the current output levels. Most sectors in the S&P 500 index were higher, led by technology and financials, Utilities and Consumer Staples bucked the trend. The Institute of Supply Management reported a better than expected manufacturing figure for June.

Geopolitical Issues Eases Allowing Stocks to Rise

Geopolitical tensions eased in the wake of the Trump Xi meeting, which saw both sides agree to keep the status quo as it comes to tariffs. Trump also made a surprise visit to the Demilitarized Zone and became the first US President while in office to set foot in North Korea.  Teams from each side will resume talks over the next few weeks.

Oil Prices Surge on OPEC Cuts

Oil prices jumped on reports that Saudi Arabia and Russia signaled their support for an extension of OPEC output cuts.  The cuts would likely be extended by 6-9 months.  Bank of Japan released its Q2 Tankan report.  Large manufacturers came in at 7 versus expectations of 9 while small manufacturing came in at 1 versus expectations of 2.  Capex is expected to rise 7.4% year over year vs. 8.1% expected.  These were the weakest Tankan readings in nearly three years.

ISM Manufacturing Falls Less than Expected

The ISM manufacturing index came out at 51.7, lower than May’s 52.1 but ahead of expectations of 51.3. The number represents the share of businesses that expanded activity during the month. The report components were mixed. On a positive note employment index showed 54.5, up from the May’s 53.7, a month when nonfarm payrolls grew by just 75,000 and triggered worries of a hiring slowdown. Production also showed a sharp increase at 54,1, up from 51.3, while supplier deliveries fell to 50.7. But not everyone component was good. Inventories, which are a key component of GDP, fell to 49.1, while prices paid slumped to 47.9, a fall from 53.2 and further indication that inflation pressures remain muted despite the Federal Reserve’s decade-long effort to induce what it considers a healthy level. Also, new orders was at 50, a slide from 52.7 and indicative of worry about conditions ahead.