 The Market Sum | Insight after the bell
By Caleb Silver, Editor in Chief Thursday's Headlines 1. Markets Continue to Rally on Trade Optimism 2. The ECB Lowers Rates and Announces New Stimulus 3. Consumer Prices Rise in August 4. U.S. Federal Budget Tops $1 Trillion Markets Closed
 Markets Today
U.S. markets came within a few points of topping record highs today as investors keep pushing technology and industrial stocks higher. The Trump administration announced last night (via Twitter) that it will delay the implementation of the latest round of tariffs for a couple of weeks, at China's request. In Europe, the ECB lowered bank lending rates and resumed a stimulus program designed to provide liquidity to European banks and treasuries.
As we climb toward market records again, some strategists, like Schwab's Randy Fredericks, have pointed out how similar the S&P 500 looks to the same time last year.  Just as in 2018, the S&P 500 was headed for record highs. But unlike 2019, the Federal Reserve was in the midst of raising rates a year ago—the first increases to the federal funds rate since before the financial crisis.
That didn't go very well. The stock market severely corrected, entering bear territory for a few days around Christmas, wiping out all the gains from earlier in the year.
As we know, the Fed promptly shifted course and began cutting rates in order to support the economic expansion. That led to a 20% rebound for the broader market, and we've bounced around those levels for the past several months.
What's Next? The Federal Reserve will meet next week on interest rates, and traders are betting on an 88% probability of a 0.25% rate cut, according to the CME's Fed Watch tool.
That probability has decreased from 100% over the past several weeks, however, as news around the trade war has improved, and economic data has come in better than expected.
We saw that again today when consumer prices were reported for August and showed a 2.4% increase (excluding food and energy) from a year ago.  Why it Matters That increase is important because it shows signs that inflation might be finally starting to creep up again. The Federal Reserve wants inflation around its 2% target rate, but it has been stubbornly low all year. Today's report showed that it is finally moving up, which may dissuade the Fed from cutting rates next week. That would infuriate President Trump, who has started calling the Fed "Boneheads," in recent tweets.
The ECB Cuts Rates... Again Meanwhile, in Frankfurt... at ECB President Mario Draghi's next-to-last meeting, the central bank announced a 10 basis point (0.1%) cut to the deposit rate that banks pay to park excess reserves with it. The move pushed the rate to minus 0.5%. In other words, banks are paying the ECB to hold money for them.
The ECB also announced that it would restart its Asset Purchase Program, which is a new round of monthly bond purchases, similar to the quantitative easing program that the U.S. Federal Reserve has been using since the financial crisis.
Both moves were expected, and both are intended to help jumpstart the slowing eurozone economy and prevent a recession. The gravity of the forces pulling down the European economy, however, may be too strong. Here's a passage from the ECB's press release this morning:
"The risks surrounding the euro area growth outlook remain tilted to the downside. These risks mainly pertain to the prolonged presence of uncertainties, related to geopolitical factors, the rising threat of protectionism and vulnerabilities in emerging markets."
And here's a chart of eurozone GDP, courtesy of tradingeconomics.com.  The uncertainties Draghi is referring to are well known:
The solution, as the ECB sees it, is to keep lowering borrowing rates for banks, and to buy assets (government bonds) to make sure there is demand for those banks to borrow against. If the strategy sounds familiar, it's because it is very similar to some of the strategies the Federal Reserve and the U.S. Treasury used to steer the country out of the financial crisis in 2009.
European markets rallied on the news, of course. Who doesn't like cheap money? The euro fell (again) against the dollar, and the combination of the ECB continuing to lower rates and the falling euro is getting under some Trump's skin.  U.S. Postpones Next Round of Tariffs Late Wednesday, President Trump tweeted that he will delay increasing tariffs on $250 billion worth of Chinese goods from Oct. 1 to Oct. 15 as a "gesture of good will" to China. Trump said he ordered the delay, "at the request of the vice premier of China, Liu He, and due to the fact that the People's Republic of China will be celebrating their 70th Anniversary."
The tariffs would have gone from 25% to 30% on $250 billion worth of goods for this round. The Trump Administration still plans to impose a 15% tariff on about $112 billion worth of goods.
Trump just announced that he would consider an interim trade deal with China
The 15% taxes apply to about $112 billion of Chinese imports. All told, more than two-thirds of the consumer goods the United States imports from China now face higher tariffs. U.S. Budget Deficit Tops $1 Trillion
This is one of those mind-blowing numbers that most people don't care about until it becomes an issue that threatens to shut down the government. According to the U.S. Treasury Dept., the federal budget deficit rose to nearly $1.07 trillion last month as the government took in $214 billion less than it spent. The last time the budget deficit topped $1 trillion was in 2012, when Barack Obama was president.
As the deficit has grown, so has the national debt, which is now at $22.5 trillion, up 13% since Trump took office. The 2017 tax cuts for corporations and individuals has contributed to the budget deficit, which stood at $584.6 billion in 2016.
In case you are interested, this is how the U.S. government spends, and loses, money.
courtesy Treasury.gov 
chart courtesy www.koyfin.com  Shares of LKQ rose by nearly 12% today after the activist investor, ValueAct Capital, obtained an over 5% stake in the company. Varian Medical Systems' stock price increased by almost 4% following China's announcement that it would exclude medical linear accelerators, of which Varian is a manufacturer, from the tariffs imposed on U.S. imports.  Shares of DXC Technology fell by nearly 11% after the sudden announcement that Mike Lawrie, the president and CEO, who has been with the company since its founding in 2017, has retired. Oracle's stock price decreased by more than 4% today amid Q1 revenue failing to meet expectations and an announcement that co-CEO Mark Hurd is taking an indefinite medical leave.  Word of the Day: A budget deficit occurs when expenses exceed revenue and indicate the financial health of a country. The government generally uses the term budget deficit when referring to spending rather than businesses or individuals. Accrued deficits form national debt.  Currency Facts The U.S. Mint has added many new anti-counterfeiting measures to its latest round of legal tender. Many of them you can't see with the naked eye. But on the back of the $10 bill (the one with Hamilton on the front), the Mint included an image of a person standing in one of the lower windows of the U.S. Treasury. You have to look real close or use a magnifying glass, but it's there.
Here's a blown up version—apologies for the blur. 
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Thursday, September 12, 2019
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