Apple (AAPL) had a great day on Wednesday. The rest of the market... not so much. The S&P 500 closed down 0.1% while the Dow Jones Industrial Average lost 0.3%.
At the moment, it is looking like the market, including Apple, will start today's session on a negative note. The S&P 500 futures are down 12 points and are trading 0.5% below fair value. The Nasdaq 100 futures are down 45 points and the Dow Jones Industrial Average futures are down 143 points.
In a connect-the-headline-dots explanation, this morning's negative bias is being attributed to trade concerns.
Those concerns reportedly are an offshoot of the White House confirming that the Trump Administration asked the U.S. Trade Representative to consider applying a 25% tariff to $200 billion worth of imported Chinese goods versus a 10% tariff floated in an earlier proposal.
That thought was planted in the market's mind by a Bloomberg report yesterday, so it's a little befuddling that today's reaction is being connected so closely to the confirmation of the report.
Perhaps the real explanation is a tandem one, which incorporates the trade concerns and the understanding that the FOMC didn't sound concerned by them in yesterday's directive. In fact, the directive made no mention of trade matters and qualified the risks to the economic outlook as "roughly balanced."
The takeaway from the directive is that the FOMC remains on track to raise the target range for the fed funds rate again at the September meeting, which is a reminder to market participants that the Fed put isn't the guarantee that it used to be.
Now, it needs to be pointed out that this morning's behavior by the Treasury market doesn't reflect the same degree of trade concern that is reportedly wrapped up in the equity futures market.
To wit, the yield on the 10-yr note is down just one basis point to 2.99%, meaning there hasn't been a rapid flight to safety, which also means one can't rule out the prospect of the equity market making a comeback effort after the initial downshift.
The trade angst, however, has helped prop up the dollar, evidenced by the 0.4% gain in the U.S. Dollar Index to 95.03. That 95.00 level will be watched closely, as the last close above 95.00 was on July 19.
Some weakness in the British pound is aiding the U.S. Dollar Index, and it follows on the news that the Bank of England voted unanimously to raise the Bank Rate 25 basis points to 0.75%. The rate hike was expected, but judging by the pound's response, it would seem that traders don't expect a follow-on rate hike in the near future.
Tesla (TSLA) investors, meanwhile, are anticipating a a nice hike in the company's stock price. Shares of TSLA are up nearly 10% in pre-market action after Tesla reported Q2 earnings and held the line on its outlook that it expects to be GAAP profitable in the third and fourth quarters and affirmed that it won't be raising equity.
Tesla's news has electrified some short-covering activity, which is exacerbating the stock's gain, yet it hasn't electrified the broader market given that Tesla's position is a company-specific issue.
Similarly, another encouraging initial claims report hasn't electrified the futures market, largely because the good news wasn't a surprise and market participants have their sights trained on Friday's Employment Situation Report for July.
For the record, initial claims for the week ending July 28 increased by 1,000 to 218,000 (Briefing.com consensus 220,000), which is the 178th straight week they have been below 300,000. Continuing claims for the week ending July 21 decreased by 23,000 to 1,724,000.