The U.S. is slapping a 10% tariff on an additional $200 billion of Chinese imports, effective September 24, and increasing the tariff rate for that tranche to 25% on January 1. If China retaliates (which it will), the U.S. will immediately pursue tariffs on an additional $267 billion of Chinese imports.
FedEx (FDX) came up well shy of fiscal first quarter earnings expectations, hurt by higher costs, and is indicated 2.3% lower.
Oracle (ORCL) topped fiscal first quarter earnings estimates, but disappointed with its second quarter revenue outlook and is indicated 3.9% lower.
General Mills (GIS) beat fiscal first quarter earnings expectations, but came up shy on revenues and is indicated 3.0% lower.
AutoZone (AZO) easily beat fiscal fourth quarter earnings estimates, but its sales and same-store sales were a little light of expectations and is indicated 5.7% lower.
We now interrupt that string of seemingly negative reporting to inform you that the S&P futures are... up?
That's right. The S&P futures are up seven points and are trading 0.3% above fair value. The Nasdaq 100 futures are up 20 points and the Dow Jones Industrial Average futures are up 84 points.
It's not just a U.S. thing either. Markets in Asia traded higher, led by a 1.8% gain in China's Shanghai Composite, and bourses in Europe are posting modest gains.
What's the rationale for the positive bias? That is the question.
Some will argue that the U.S. market was relieved to hear that the tariff rate was only 10%, yet that excuse comes up short knowing that there were reports out yesterday suggesting that would likely be the case and also knowing that the market slumped Monday after President Trump hinted a tariff announcement would be coming after Monday's close.
In other words, the market effectively knew yesterday during the trading session what it learned after the close, so something that was spun as a negative yesterday can't be taken seriously with a positive spin today.
The move in the Shanghai Composite, meanwhile, is also suspect for its seemingly giddy nature. It strikes us more as some giddy-up tied to reports that the People's Bank of China is likely to cut the required reserve ratio in October and perhaps some government-fueled price support to make it appear as if the troubled stock market isn't going to buckle from the latest U.S. trade measure.
The latter is pure speculation on our part, but the stepped-up tariff pressure, which has been a catalyst throughout the year for a major slide in the Shanghai Composite, isn't exactly the type of news one would expect to be cheered by Chinese investors to the tune of a nearly 2.0% upside move.
The fact of today's trading so far is that global equity markets are trading higher despite the new tariff action.
There is a positive bias and traders are running with it for the time being. That could be providing some fuel for short-covering activity that will make things look better initially than they might have looked otherwise.