Equities were again rattled after a further escalation of tariffs. The President stated he is increasing the steel and aluminum tariff on Canadian goods to 50% form 25% to retaliate against Canada’s move to place a 25% tariff on electricity sent to the US.
At the time of this writing, the selling is considerably broader than the previous day’s selloff with over 400 S & P 500 companies declining in value according to Bloomberg.
The CBOE Volatility Index (fear index) spiked to 29, up more than 50% from levels three weeks ago. However, even with this increase, the index is far from indicating a sense of panic, a reading that is typically around 80.
Commenting on yesterday’s data release, January’s job opening rose instead of falling, indicating a steady demand for workers. Job openings remain above pre-pandemic averages.
Perhaps of greater significance the layoff rate dipped to 1.0%, the lowest since June. The so-called quite rate, which measures the percentage of people voluntarily leaving their jobs each month, rose to 2.1%, the highest since July.
The number of vacancies per unemployed worker, a ratio Fed officials watch closely as a proxy of balance between labor demand and supply, was unchanged at 1.1. Even though it is down considerably form it 2022 peak of 2 to 1, the data is indicating a “tight” labor market.
Is this data still meaningful given the potential changes that may occur? As noted many times, little has been implemented. To date it has been almost all bluster and little action, hence the rising uncertainty levels discussed by most.
Late in the day, it was announced that Ukraine is ready to accept the US proposal for a 30-day truce. Equites reversed some of their losses. Treasuries sold off nominally, but the curve did again steepen.
Also late in the day, it was stated that the Administration is “reevaluating plans” to double steel and aluminum tariffs after Ontario announced it would suspend a 25% surcharge on electricity sent to the US.
The CPI is released at 8:30. Analysts are expecting a nominal improvement over last month’s level. How will the data be interpreted?
Yesterday was the thirteenth consecutive day the S & P 500 moved 1%. After a period of considerable calm, volatility has returned. Are we headed to a Minsky moment defined as “a sudden collapse of the market following a long period of unsustainable speculative activity involving high debt amounts taken by investors or central governments?”
Last night the foreign markets were up. London was up 0.72%, Paris up 1.60% and Frankfurt up 2.02%. China was down 0.23%, Japan up 0.07% and Hang Seng down 0.76%.
Futures are up about 0.75% ahead of the CPI. The President walked back his comments about a possible recession, the cease fire in Ukraine and yet another change in tariffs is contributing to the positive tenor. The 10-year is off 5/32 to yield 4.31%.
