There are two scripts to read from on Wall Street. Both have trade concerns as their plot line. One script has a happy ending. The other script does not. It is easy to tell on a day-to-day basis from which script the market is reading.
Today, for instance, features the script with the unhappy ending.
Currently, the S&P futures are down 13 points and are trading 0.4% below fair value. The Nasdaq 100 futures are down 59 points and the Dow Jones Industrial Average futures are down 168 points, which leaves them 0.6% to 0.8% below fair value.
Those leanings will translate to a lower start for the cash market, which will reportedly be buffeted by the headlines highlighting a U.S. plan to clamp down on companies with at least a 25% ownership stake by a Chinese company from making investments in companies that provide "industrially significant technology."
Furthermore, there is some attention being paid to a tweet from President Trump, who said countries with trade barriers and tariffs on goods entering their country need to remove them or they will be met with "more than Reciprocity by the U.S.A."
And there you have it. That is the headline excuse for the weakness in the futures market and the weakness seen in foreign markets, which has included a 1.1% decline for China's Shanghai Composite and a 1.5% decline in Germany's DAX Index.
Notably, the People's Bank of China announced a 50 basis points reduction in its required reserve ratio for banks, effective July 5 -- or one day before the U.S. enacts tariffs on $34 billion worth of Chinese goods that is going to be met by retaliatory tariffs from China on U.S. goods worth a comparable amount.
Some see that move as a sign China is digging in to deal with trade issues that stand to impact its economy in a negative way.
Harley-Davidson (HOG) is digging in, too, acknowledging that it won't raise prices to cover the cost of the EU's reciprocal tariffs; instead, it will work to shift production to international facilities and expects an aggregate annual impact of $90 mln -$100 mln as a result of its decision not to pass the higher costs on to its customers.
Shares of HOG are down 1.7% in pre-market action.
Campbell Soup (CPB) is another mover of note, up 5.7% on a New York Post report that Kraft Heinz (KHC) might be interested in acquiring the soup maker. Meanwhile, General Electric (GE) is little changed in the face of press reports suggesting it might be close to selling its industrial engine business for $3 billion.
There isn't a great deal of corporate news thus far, which is why most of the market's attention is centered on the trade headlines.
Something to keep in mind is that the Treasury market isn't that revved up by the contentious-sounding trade developments. The yield on the 10-yr note is down just one basis point to 2.89%.
The lack of a strong safe-haven bid there could be a tacit sign that the stock market might put up some fight after it takes a jab or two in the initial stages of today's trading. We have seen that script play out before, too -- the one where it looks like the market is going to get knocked out, only to see it come alive like Rocky Balboa in later rounds to put up a good fight.
Today's lone economic release of note is the New Home Sales Report for May (Briefing.com consensus 666,000; Prior 662,000) at 10:00 a.m. ET.
For now, buyers are staying close to home, studying a script that calls for an unhappy start.