U.S. markets struggled throughout Thursday’s session following signs the global trade spat may be escalating along with additional comments from President Trump on interest rates.

The rebound off the morning lows on trade concerns stalled after the President indicated he wasn’t thrilled with the Fed’s interest-rate hikes.

The remarks raised questions about the ability of the currency to strengthen further in 2018 as the major indexes settled mixed.

Despite the ongoing trade rhetoric, the small-caps showed strength while volatility easily held key resistance.

The Russell 2000 rallied 0.6% after making a second half push to 1,702. The close above the 1,700 level was a bullish signal as the index came within a 6-pack of fresh all-time highs.

The Dow had its 5-session winning streak snapped following the 0.5% pullback with the morning low tapping 25,052.

Support at 25,000 is back in play and a level that has been holding for 5-straight sessions.

The S&P 500 sank 0.4% on the backtest to 2,799 shortly after the opening bell while holding 2,800 for the 4th time in the past 5 sessions. A move below 2,790 over the near-term would likely signal additional weakness and a possible near-term top.

The Nasdaq fell for the 3rd time in 4 sessions after giving back 0.4% while trading to a low of 7,811. The index has been holding 7,800 for 6-straight sessions with a close below 7,750 signaling a possible short-term peak for Tech.

Utilities and Real Estate showed the most sector strength with both jumping 1% while Materials were up 0.4%.

Financials paced sector laggards after tanking 1.5%. Communications Services sank 0.7% and Health Care declined 0.6%.

Global Economy – European markets closed mostly lower on chatter the European Union is preparing a new list of American goods to hit with new tariffs.

France’s CAC 40 and Germany’s DAX 30 fell 0.6%.

The Belgium20 gave back 0.3% and the Stoxx 600 Europe slipped 0.2%. UK’s FTSE 100 climbed 0.1%.

UK June retail sales ex-auto fuel declined 0.6%, weaker than estimates for a gain of 0.1%. June retail sales including auto fuel fell 0.5%, below forecasts for a rise 0.2%.

Asian markets were weak following comments from China’s foreign ministry, saying the country isn’t afraid of a trade war after U.S. economic advisor Kudlow blamed Chinese President Xi Jinping for stalled trade talks.

China’s Shanghai fell 0.5% and Hong Kong’s Hang Seng dropped 0.4%. South Korea’s Kospi was lower by 0.3% and Japan’s Nikkei dipped 0.1%. Australia’s S&P/ASX 200 advanced 0.3%.

The Japan June trade balance was in surplus by 721.4 billion yen, wider than expectations of 531.2 billion yen.

June exports were up 5.7%, missing forecasts for a jump of 7%. June imports rose 2.5%, weaker than expectations of 5.3%.

Initial Jobless Claims fell 8,000 to 207,000 in the week ending July 14th, versus forecasts of 220,000. This represented the lowest reading since December 1969.

The 4-week moving average declined to 220,500 from 223,250. Continuing claims rose 8,000 to 1,751,000 in the July 7th week after edging up 1,000 o 1,743,000 at the end of June.

The Philadelphia Fed Business Outlook Survey for July checked in at 25.7, up 5.8 points from a 19-month low of 19.9 in June, and topping expectationsfor a print of 22.

The job index dropped to 16.8 from 30.4, with the workweek at 13.7 from 24.2. New orders climbed to 31.4 from 17.9. Prices paid increased to 62.9 from 51.8, with prices received at 36.3 from 33.2.

The 6-month general business activity index declined to 29 from 34.8. Components for the 6-months ahead showed employment at 27.5 from 34.1, new orders at 28.3 from 38.2, prices paid at 59.7 from 62.6, and capital expenditures at 31.4 from 36.5.

Leading Indicators advanced 0.5% to 109.8 in June, topping forecasts for a rise of 0.4%, and another record high for the index.

The index has not posted a decline since May 2016 as 7 of the 10 components rose, led by ISM new orders (0.16%) and the interest rate spread (0.12%).

Non-defense capital goods orders excluding aircraft, and the average workweek, were flat while building permits made a negative contribution after slipping 0.06%.

Market Sentiment – Fed Vice Chairman Randal Quarles said the implementation of SOFR (Secured Overnight Financial Rate), the new reference rate versus Libor, is ahead of schedule.

He said SOFR already has developed a deeper market than Libor after only three months in existence and reflects over $700 billion in overnight repos every day.

Quarles also added the risks to Libor are large due to declining liquidity, and the fact it has expected to be phased out by the end of 2021.

The iShares 20+ Year Treasury Bond ETF (TLT) showed strength for the first time in 4 sessions after trading to a high of $122.45. Prior resistance at $122.50-$122.75 held with a move above $123 being a more bullish development.

Support from late June remains at $121.50-$121.25.

Market Analysis – The Spiders Dow Jones Industrial Average ETF (DIA) fell for the first time in 6 session after testing a low of $250.61. Fresh and upper support at $250.50-$250.

A close below the latter could signal additional weakness towards $248-$247.50 and the 50-day moving average.

Lowered resistance is at $251.50-$252 with a close above $253 signaling a possible run towards $255-$256 and late February highs.

RSI is back in a slight downtrend with support at 60-55. A close below the latter would be a bearish development signaling additional weakness. Resistance is in the 65 area and the early June highs.

The Energy Select Sector Spider (XLE) is trying to form a short-term bottom after closing higher for the 2nd-straight session while reaching an intraday peak of $75.47.

Resistance at $75.50-$76 and the 50-day moving average held with a close above the latter being a slightly bullish development for higher highs.

Support is at $74.50-$74 with a close back below the latter signaling additional weakness.

RSI is approaching resistance at 50-55 with a close above the latter a more bullish development and signaling additional strength. Support is at 45-40.

All the best,
Roger Scott