It's another day and perhaps another lost dollar. The futures for the major indices are all noticeably lower with trade deal angst continuing to win out as the primary trading catalyst.
Currently, the S&P futures are down 28 points and are trading 0.8% below fair value. The Nasdaq 100 futures are down 94 points and are trading 1.0% below fair value. The Dow Jones Industrial Average futures are down 226 points and are trading 0.5% below fair value.
The latest headline of note came after yesterday's close when President Trump told listeners at a Florida rally that China "broke the deal" and the he is perfectly content to make China pay with higher tariff rates, saying "we won't back down until China stops cheating our workers and stealing our jobs."
That hard-line perspective isn't giving the market much reason to think a deal is going to be worked out this week, especially since there are related reports suggesting China is ready to implement countermeasures to any new tariff actions, and that it has been emboldened by the seeming success of its stimulus efforts, as well as President Trump's urging the Fed to cut interest rates, which China has construed as a tacit acknowledgment of impending weakness for the U.S. economy.
To say the least, things could be "frosty" behind closed doors when Vice Premier Liu He meets with U.S Trade Representative Lighthizer and Treasury Secretary Mnuchin today and tomorrow "to make a deal."
The market for its part is readying itself for the news that a deal has not been made, which is why stock prices have sunk, the CBOE Volatility Index has surged, and Treasury yields have dropped.
It's just kind of a headline mess right now regarding the trade situation, which is why investors are tidying up portfolios by taking some money off the table and are refraining from buying on dips with a great deal of conviction.
It's also why the market has been ignoring most of the earnings results of late, including those from Walt Disney (DIS) last night, relegating them to background material as the trade situation has taken center stage. Still, when there are disappointments, like Stamps.com (STMP), there are precise reactions that hit individual stocks hard. Shares of STMP are indicated 47% lower.
The economic data, meanwhile, seems to register only when it is weak, as the trade situation has made the market more attentive to negative news than positive news that isn't related to the trade negotiations.
This morning's data was neither acutely weak nor particularly strong. It was mostly middle of the road, which is why it will be a talking point more than a market-moving point.
- The trade deficit was $50.0 billion in March (Briefing.com consensus -$51.2 bln), up from -$49.3 billion in February. Exports of $212.0 billion were $2.1 billion more than February exports. Imports of $262.0 billion were $2.8 billion more than February imports.
- The key takeaway from the report is that there hasn't been a meaningful improvement in the trade deficit despite efforts to reduce it with increased tariffs.
- The Producer Price Index for final demand increased 0.2% m/m in April, as expected, while the index for final demand, less food and energy ("core PPI") increased 0.1% (Briefing.com consensus 0.2%). That left the yr/yr increases at 2.2% and 2.4%, respectively, unchanged from March.
- The key takeaway from the report is that it didn't show any acceleration in core producer inflation, which will keep the market's pass-through concerns for the consumer in check.
- Initial claims for the week ending May 4 decreased by 2,000 to 228,000 (Briefing.com consensus 220,000). Continuing claims for the week ending April 27 increased by 13,000 to 1.684 million.
- The key takeaway from the report is that the four-week moving average of 220,250 remains relatively close to a 50-year low, which implies there hasn't been any undue weakening in the labor market.
The futures weakened further after the data were released, yet that struck us as more of a trade of attrition than anything else for a market that remains anxious to hear some trade deal contrition.