The news of the day (or last night really) is that Gary Cohn, White House Chief Economic Adviser, announced his resignation. That resignation wasn't entirely surprising; nonetheless, the market's initial impression of the news is that it isn't good news.
The S&P futures are down 18 points and are trading 0.8% below fair value. The Dow Jones Industrial Average futures are down 240 points and the Nasdaq 100 futures are down 38 points.
Those indications, however, are greatly improved from overnight action. The S&P futures had been down as many as 42 points while the Dow Jones Industrial Average and Nasdaq 100 futures had fallen as many as 442 points and 109 points, respectively.
It will be a negative start, then, for the cash market.
The main interpretation of Mr. Cohn's announcement is that it implies the president is going to move ahead with his proposal to apply tariffs on steel and aluminum imports. Mr. Cohn is reportedly opposed to those tariffs.
Accordingly, the negative bias in the futures trade is grounded in concern that the U.S. is on course to provoke a trade war if it applies a blanket (as opposed to targeted) execution of the steel and aluminum tariffs. It should be noted that Commerce Secretary Wilbur Ross appeared on CNBC this morning and downplayed the talk of a brewing trade war, saying that is not the administration's aim.
On a related note, there are added reports this morning that the administration could soon step up efforts to curb imports of Chinese goods. The January Trade Balance Report could incite the Trump Administration to do just that.
The trade deficit widened to $56.6 billion (Briefing.com consensus -$55.0 billion) from a downwardly revised $53.9 billion (from -$53.1 billion) in December.
With the heated rhetoric surrounding trade issues, this is bad timing to see a widening deficit, which flowed in part from a $1.5 billion increase in the deficit with China to $35.5 billion in January.
Overall, the widening in the trade deficit, which was the largest since October 2008, was the result of exports being $2.7 billion less than December exports and imports falling less than $0.1 billion from December imports.
The real trade deficit, meanwhile, increased to $69.7 billion from the fourth quarter average of $66.8 billion. The key takeaway from the report, then, is that trade will again be a drag on first quarter GDP growth.
Separately, fourth quarter productivity was revised to 0.0% (from -0.1%) while the increase in unit labor costs was revised to 2.5% (from 2.1%). This report won't have much impact given its dated nature and the market's recognition that it will get a more timely read on wage inflation with Friday's release of the Employment Situation Report for February.
That report, if nothing else, should be expected to produce another healthy nonfarm payrolls number, especially since the ADP Employment Report today showed an estimated 235,000 positions were added to private sector payrolls in February.
The ADP report also revealed that the job gains were broad-based by company size and industry. Per usual, the Service-providing sector accounted for the bulk of the job gains (198,000).
There is a decent bit of corporate news, much of it emanating from the retail industry, which is still releasing fiscal fourth quarter earnings results. Dollar Tree (DLTR) is down 11% after disappointing with its report. Conversely, Abercrombie & Fitch (ANF) is up 3.6% after pleasing with its earnings news.
The corporate news, though, is taking a backseat to the political news, which is fostering some uncertainty -- and some continued volatility -- in the stock market.