U.S. equities dribbled lower on Monday, but the bulls were able to cut the losses into the closing bell. News flow was light, with a focus on the prospects of tax reform in Washington after the failure of “Trumpcare” two weeks ago.
The latest is that the plan would include cuts to both individual and business taxes and is unlikely to include controversial border-adjustment taxes. This suggests a more modest plan than many were expecting (since the BAT was needed to offset the cost of deeper rate cuts).
In the end, the Dow Jones Industrial Average lost 0.1%, the S&P 500 lost 0.2%, the Nasdaq Composite gave back 0.3% and the Russell 2000 was lower by 1.2%. The dollar was higher, Treasury bonds stronger, gold gained 0.2% and oil snapped a four-day winning streak to lose 0.7% on reports of diminished compliance with OPEC’s production cut agreement. The strength in T-bonds boosted the Ultra Treasury Bond ETF (NYSEARCA:UBT) recommended to Edge subscribers by 1.9%.
Defensive telecom stocks led the way with a 0.4% gain. Tesla Motors Inc (NYSE:TSLA) surged 7.3%, closing in on the $300-a-share level and hitting a new record high, thanks to the reporting of record deliveries of 25,000 vehicles in the first quarter. Panera Bread Co (NASDAQ:PNRA) gained 7.9% on a Bloomberg report the company is exploring a potential sale.
On the downside, General Motors Company (NYSE:GM) fell 3.4% after reporting weaker-than-expected March sales growth of 1.6% versus the 7.5% that was expected.
On the economic front, March ISM manufacturing activity beat expectations slightly but still posted a drop from February’s result. Inflation, as measured by the prices paid component, increased at its fastest rate since May 2011.
Watch for more on inflation, and the pressure it’s putting on the Federal Reserve to raise interest rates, as the week rolls on. We will get the release of the latest Fed meeting minutes on Wednesday ahead of the latest jobs numbers on Friday.
Both will shift expectations for the upcoming June policy meeting. As a reminder, the Fed raised interest rates in March for the second time in three months — a dramatic quickening of the prior pace of two rate hikes over 10 years.
Anthony Mirhaydari is founder of the Edge (ETFs) and Edge Pro (Options) investment advisory newsletters. A two-week and four-week free trial offer has been extended to Investorplace readers. Redeem by clicking the links above.