Trade war fears from the tariff-for-tariff tradeoff between the United States and China seemed to ease as the Dow Jones Industrial Average climbed over 200 points as of 11:10 a.m. ET. Helping to lead the rally was homebuilder Caterpillar, which got a tailwind of positive news when the Commerce Department reported that homebuilding grew by 9.2% to 1.282 million units–higher than the expected 1.235 from a Reuters poll.
The housing starts numbers was a positive sign for the housing market, which has largely underperformed the broad market in this extended bull run. According to the National Association of Homebuilders, housing comprises 15 to 18% of the United States’ gross domestic product.
“Permits have clearly faded from the cycle high 1.38 million set in March of this year, and suggest that starts will likely remain rangebound for the rest of the year,” noted Robert Kavcic, a senior economist with BMO Capital Markets. “This is consistent with our view that residential construction looks to be largely a wash on overall economic growth at this stage of the cycle.”
Source: tradingeconomics.com
The markets have largely been able to slough off any negative effects of the trade wars. After the close of Monday’s trading session, U.S. President Donald Trump announced he was ready to commence with an imposition of $200 billion worth of tariffs on Chinese goods despite scheduled trade talks with China to ease trade tensions.
The new round of U.S. tariffs on 10% (25% by year’s end) of Chinese goods signals that the U.S. won’t relent on the application of pressure to force China’s hand in making a deal when actual negotiations materialize. The list of goods affected by the new round of tariffs was apparently modified by the White House, which removed about 300 goods from an initial list that included smart watches, certain chemicals, bicycle helmets, high chairs, and other goods.
Related: Treasury Yields Rise Amid U.S.-China Tariff Tennis Match
In less than 24 hours, China responded with $60 billion worth of tariffs on U.S. goods beginning on Sept. 24. The new round of tariffs from China are said to affect a list of 5,207 products within a range of 5 to 10% as both the U.S. and China have already slapped each other with tariffs worth $50 billion total.
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