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BUSINESS Saturday 22 June 2019
A25

Stocks soar while bonds are signaling gloom. What's up?

By STAN CHOE MOVING MARKETS?
CHRISTOPHER RUGABER Yes. Optimism is rising that
NEW YORK (AP) — Why is the world's largest econo-
the stock market so happy mies can make progress on
and the bond market so their trade dispute when
gloomy? the U.S. and Chinese lead-
Just as the S&P 500 was set- ers meet at the Group of 20
ting a record high Thursday, summit next week. Trump's
bond yields were tumbling tweet announcing the
to their lowest levels since meeting earlier this week
Donald Trump was elected. helped send the S&P 500 to
The yield on the 10-year one of its better days of the
Treasury, which influences year, up 1%.
rates for mortgages and ___
other loans, dropped be- AREN'T THE TWO THINGS
low 2% at one point. It was MOVING MARKETS MUTUAL-
above 3.20% in November. LY EXCLUSIVE? IF THE TRADE
Usually, stock prices rise WAR GETS RESOLVED, WILL
when investors are feel- THE FED STILL CUT RATES?
ing confident. Bond yields, If Trump and Chinese Presi-
meanwhile, often fall when dent Xi Jinping make so
investors are worried about much progress that a deal
a softening economy. How seems near, Fed policy-
can both be happening A television screen on the trading floor of the New York Stock Exchange shows the rate decision makers may not cut rates,
at the same time? In large of the Federal Reserve, Wednesday, June 19, 2019. or at least not in July. But
part, it's because investors Associated Press few economists expect
are locking in bets based much progress will be
on expectations for what a sharp turnaround from It's also not just the Fed. facturing, countries have made. Most analysts say
the Federal Reserve will December 2018, when the Central banks around the seen slowing momentum that the most likely out-
do with interest rates. The Fed raised rates for the sev- world have shown their as the global trade war come is that the two sides
U.S.-China trade war is enth time in two years. willingness to keep interest weighs on trade and busi- agree to schedule talks. It's
also playing a role. Here's For stocks, lower rates can rates low to invigorate their ness confidence. not clear whether Trump
a look at how ebullience goose prices higher be- economies. "The bond market has will suspend his threat to
and trepidation can occur cause stocks suddenly ___ reacted more power- slap more tariffs on the re-
simultaneously: look more attractive than WHY ARE TREASURY YIELDS fully than the equity mar- maining $300 billion in Chi-
___ bonds. Lower rates also FALLING? kets over the last several nese imports that haven't
HOW IS THE FED PUSHING can encourage borrowing Short-term yields tend to fall months, both in anticipa- yet been taxed.
THE STOCK MARKET HIGH- and more economic activ- when expectations build tion of Fed news and when Even if the Trump-Xi meet-
ER? ity. for coming rate cuts. Lon- it comes to global growth ing goes well, the effects
Most investors expect the "Markets have accept- ger-term yields, meanwhile, worries," said Thooft. of Trump's trade fights with
Fed to cut interest rates ed the new world order fall when expectations for The bond market is usually Europe and Mexico, as well
at its next meeting in July where low interest rates are inflation are low and wor- seen as the more sober one as China, will likely linger.
for the first time since the viewed as a huge positive ries about the economy when it comes to assessing U.S. farmers have been
economy was swamped and people buy into the are growing. economic trends, rather hurt by retaliatory tariffs
under the Great Recession fact that you can afford to Inflation has remained re- than the stock market, but imposed on agricultural
in 2008. Not only that, many pay higher valuations" for markably tame. Some con- Thooft said the movement exports and U.S. business
investors expect the cen- stocks, said Nate Thooft, cerning economic figures, in bond yields may have investment has slowed, as
tral bank to cut rates an- senior portfolio manager meanwhile, have been been overdone. companies delay planned
other one or maybe even at Manulife Asset Manage- popping up around the ___ expansions amid greater
two times later this year. It's ment. world. Particularly in manu- IS THE TRADE WAR ALSO uncertainty.q

US home sales climbed 2.5% in May amid lower mortgage rates

By JOSH BOAK Rates for the 30-year mort- year, but it's been insuffi-
WASHINGTON (AP) — U.S. gage are averaging 3.84% cient to inject a meaningful
home sales jumped 2.5% this week, down sharply amount of inventory that
in May, as lower mortgage from 4.57% a year ago, ac- would give would-be buy-
rates appeared to help cording to the mortgage ers more choices.
buyers overcome afford- buying company Freddie Sales listings have in-
ability challenges. Mac. creased 2.7% from a year
The National Association Still, the real estate market ago to 1.92 million homes.
of Realtors said Friday that has yet to shake off last But the market contains a
existing homes sold at a year's slump. Home sales mere 4.3 months' supply of
seasonally adjusted an- fell 1.1% from a year ago. properties, well below the
nual rate of 5.34 million last The faster pace of sales six months that were once This June 13, 2019, photo shows a house with a "sold pending"
month, up from 5.21 million also boosted prices. The deemed to be a sign of a sign fixed on the realtor's sign in northeast Jackson, Miss.
in April. median sales price in May healthy market. Associated Press
The recent gains likely was $277,700, a 4.8% in- Over the past year, homes
came from reduced bor- crease from last year. prices between $250,000 But sales of homes at that the lack of entry-level
rowing costs that made it More homes have come and $750,000 experienced cheaper price points have homes has been an obsta-
easier to finance a home. onto the market in the past the strongest sales growth. been flat or falling, a sign cle for would-be buyers.q