A trade deal between the U.S. and China could be coming soon -- like before the end of the month -- according to The Wall Street Journal. If you need a headline to explain the positive disposition of the futures market this morning, that is it.
The gist of an impending deal reportedly would include China lowering tariffs on farm, chemical, auto, and other products in exchange for the U.S. taking off the new tariffs it has imposed on Chinese imports.
A separate New York Times report suggests a trade deal at this point could be lacking meaningful remedies to resolve structural trade issues, like China subsidizing state-owned entities and cyber theft, yet that reporting has not been construed as a negative.
What the early trading bias suggests is that the stock market is not as concerned about the actual parameters of a trade deal as it is with simply getting something done that lowers the temperature around the trade dispute and allows companies to carry on with doing business and running supply chains without the tariff uncertainty hanging over them.
Currently, the S&P futures are up ten points and are trading 0.4% above fair value. The Dow Jones Industrial Average futures are up 99 points and the Nasdaq 100 futures are up 41 points, placing them 0.4% and 0.6% above fair value, respectively.
There is also some carryover momentum from Friday factoring into the trading mix, as the close above 2800 for the S&P 500 was regarded as a positive technical development that could pave the way for further upside in the near term.
There isn't much corporate news of note playing a part in the upbeat futures trade. To wit, The Children's Place (PLCE) has provided one of the more notable headlines, coming up well shy of the fourth quarter consensus earnings estimate and issuing extremely disappointing guidance for its first quarter and full year that was attributed in part to the effects of direct competitor Gymboree being liquidated.
Shares of PLCE are indicated 16% lower.
Separately, the market has parsed, and seemingly past, on remarks made by President Trump over the weekend in which he called out Fed Chair Powell for favoring a tighter monetary policy that has strengthened the dollar and undermined the competitiveness of U.S. exporters.
The market for its part seems pretty content with the Fed's stance on policy matters at this point.
We digress, yet the market's inattention to such matters underscores where its focus is this morning. It's on the prospect of a trade deal that prompts more active trade and fewer, if any, tariffs.