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Plus New Zacks Strong Buys for Tuesday, December 3
Kevin Matras   
Profit from the Pros
By Kevin Matras
Executive Vice President
Zacks Investment Research

Stocks Down As Trade Comes Into Focus

Stocks closed lower on Monday to start the new month off on a down note.

But for perspective, let's also not forget that stocks have been on a 3-month winning streak.

Anyway, the new 'deadline' traders will be watching is December 15th. That's when President Trump imposes a 15% tariff on an additional $156 billion of Chinese goods.

It's widely believed that those tariffs will be scrapped if the U.S. and China can strike a deal on a phase one trade agreement. But complicating matters is China's insistence that the U.S. also roll back existing tariffs as well. Whether that happens or not remains to be seen. In the meantime, that's likely to create a fair amount of anxiety.

Also in focus is the USMCA trade agreement. First there were reports that the House would bring it to the floor for a vote this year. Then it was said not until next year. Then there were reports that this year could still be on.

At this point nobody knows. But it sounds like it's close. And since it's believed to have widespread bipartisan support, it's expected to easily pass once it's brought to a vote, and then sail through the Senate.

The markets also learned that the U.S. will impose new tariffs on Brazil and Argentina steel and aluminum. They had been exempted from those tariffs in 2018. But after both countries devalued their currency, the administration decided to restore those tariffs to combat those unfair trade practices.

This is a much smaller issue compared to China, and the USMCA for that matter. But it does illustrate how trade is becoming (or should I say remains) a key issue for the markets.

In other news, Monday's ISM Manufacturing Index came in lower than expected at 48.1 vs. last month's 48.3 an views for 49.4. Not a particularly bad report, but it has remained below the '50' mark for 4 months in a row.

The PMI Manufacturing Index, however, came in better than expected at 52.6 vs. last month's 51.3 and estimates for 52.2.

So there's a bit of a mixed picture on manufacturing right now. But the weaker numbers, at the moment, are getting the most attention.

It also highlights the importance of getting the U.S.-China trade deal done, as well as the USMCA trade deal done.

Retail has had a solid showing with Black Friday/Weekend and Cyber Monday. Early estimates for Friday show brick and mortar sales down, but surging for online sales. And Cyber Monday is expected to set a new online shopping record with $9.4 billion.

This is a testament to our strong economy, and a strong consumer.

It also bodes well for a strong holiday shopping season.

And a strong end-of-year rally for the market.

See you tomorrow,

Kevin Matras

Executive Vice President, Zacks Investment Research


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