The stock market was down big on Monday, up nicely on Tuesday, and is indicated to open lower today. The market's fickle disposition is something investors may need to get used to given how fickle the headlines surrounding trade and the global economy are these days.
One day, it sounds like the U.S. and China are seeing eye-to-eye on working out a trade agreement. The next day it sounds like they are aiming to poke each other's eyes out. One day, it looks like there are green shoots pointing to better economic times ahead. The next day, it looks like the green shoots are only weeds.
Today, we have headlines that are a poke in the eye and a weed in the grass (and Tilray's earnings report has nothing to do with the latter).
Specifically, the Washington Post reports that President Trump has told advisers he has no intention of backing down in his dealings with China, claiming it is popular with his base and a path to winning reelection in 2020.
China, meanwhile, reported retail sales, industrial production, and fixed asset investment data for April, all of which were weaker than expected. That didn't derail China's stock market, though. The Shanghai Composite surged 1.9%, reportedly on the belief that the weak data make a strong case for delivering more policy stimulus.
Before the day is out, we might hear a similar line of reasoning in the U.S. considering the Retail Sales report for April was weaker than expected -- much weaker.
Total retail sales declined 0.2% (Briefing.com consensus +0.2%) after increasing an upwardly revised 1.7% (from 1.6%) in March. Excluding autos, retail sales rose just 0.1% in April (Briefing.com consensus +0.6) following an upwardly revised 1.3% increase (from 1.2%) in March.
Core retail sales, which exclude auto, gasoline station, building materials, and food services and drinking place sales, were little changed, which will be a weak input for calculating the goods component of personal consumption expenditures for Q2 GDP.
The softness in April might be a byproduct of a natural pullback after a really strong month of retail sales in March. Nevertheless, the key takeaway from the report is that consumers curtailed discretionary spending on goods in April in a way that will temper the outlook for Q2 GDP growth.
The futures market weakened noticeably after the report, which overshadowed a stronger-than-expected (and mostly inconsequential) Empire State Manufacturing Survey for May. The latter jumped 7.7 points to a six-month high of 17.8 (Briefing.com consensus 7.7).
The Treasury market for its part padded its gains, which took root following the data out of China. In doing so, it won't be lost on today's market that the movement has led to an inversion in the 3mo (2.40%) -10yr (2.36%) spread, which research from the Federal Reserve Bank of San Francisco has found to be the most reliable recession indicator among the different yield spreads.
So, there is a fickle mix at the moment of growth concerns and trade concerns that appears to be weighing on the futures market.
The S&P futures are down 20 points and are trading 0.6% below fair value. The Nasdaq 100 futures are down 58 points and are trading 0.6% below fair value. The Dow Jones industrial Average futures are down 174 points and are trading 0.5% below fair value.
That will translate into a lower start and will match up well with the fickle nature of a market that isn't quite sure what it should be thinking from one day -- if not one hour -- to the next.