HIGHLIGHTS

• A Friday rally save the markets from a deep decline, falling just 0.27% for the week.
• Unemployment drops to 3.9%.
• Tariffs aimed at some trading partners postponed for one month.
• An unusual conference call for Tesla does not add to confidence.
• Inflation hits the Fed’s target.

MARKET RECAP

A strong Friday rally, +1.29%, saved the equity markets, turning what would have been a bad week into a small decline, just 0.27% in the US and 0.54% outside the US. At the Thursday low, the market was down 2.67% for the week and below the 200-day moving average. Stocks have now bounced off the 200-day three times. And at least so far, each successive test formed a higher low. By no means are we ready to call an “all-clear”, but so far, so good.

EMPLOYMENT

Unemployment fell to 3.9%, the lowest level since December 2000. Employers added 164,000 jobs. It was the 91st consecutive month of job growth, the longest streak on record. Average hourly pay was up by 2.6% year over year.

TARIFFS

The White House will delay a decision on tariffs targeted at the European Union, Canada, and Mexico for one month. A US delegating went to China to see if the countries can come to an agreement.

TESLA

In one of the more bizarre conference calls of all time, Elon Musk cut off legitimate analyst questions in a condescending manner, leading to speculation that the company is beginning to feel the heat from its cash drain. Pressure is mounting on the automaker as Moody’s estimates Tesla will need to raise another $2 billion to cover the 2018 cash burn and to refund convertibles that mature over the next two years. Tesla bonds are now trading as “junk” level.

INFLATION

The PCE Price Index rose 2%, year over year, hitting the Fed’s inflation target. This suggests that the Fed will remain on the path of increasing interest rates.

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