Between "constructive" trade talks, a "beautiful letter" received from President Xi, the expectation that an encounter at the G-20 meeting in June will be "very fruitful," and the acknowledgment from President Trump that he has great respect for, and a great relationship, with President Xi, the one thing still missing is a trade deal.
That missing item helped catalyze Monday's broad-based sell-off, because a series of headlines coming out of the U.S. and China sounded more acrimonious than amicable with respect to getting a trade deal done anytime soon.
Nonetheless, the market is in better spirits this morning, having learned yesterday that President Trump hasn't decided yet about whether to impose a 25% tariff rate on an additional $300 billion of imported Chinese goods. The president also suggested we should know in three or four weeks if the trade talks with China are successful.
Basically, then, market participants know nothing more of substance today than they did yesterday, but because there is a nicer tone, the futures market seems to have a nicer disposition (oblivious it seems to separate reports discussing how the U.S. has updated its military plan for Iran should it need to act on any Iranian hostilities).
The S&P futures are up 19 points and are trading 0.4% above fair value. The Nasdaq 100 futures are up 68 points and are trading 0.7% above fair value. The Dow Jones Industrial Average futures are up 130 points and are trading 0.4% above fair value.
That will translate into a higher start for the major indices, raising the question of whether the early strength will be sold into or sustained. That will be monitored closely by market participants who recognize the market has shown a great propensity to bounce back every time it has moved noticeably lower.
It would be a further blow to sentiment if the market fades quickly after the opening gains and then can't find a concerted rebound stride. The 2800 area for the S&P 500 will be a key area to watch. It held up yesterday, but if it falls today, the 200-day moving average (2775) will come into sharper focus as the next potential test for the down leg that began on May 3.
The market will cross that bridge if/when it gets to it. In the meantime, President Trump is hoping the Fed will cross the bridge and lower interest rates. He speculated in a tweet this morning that China will probably reduce interest rates to make up for business it will lose due to the tariffs before adding that, "If the Federal Reserve ever did a 'match,' it would be game over, we win!"
The Import/Export Price Index for April certainly didn't present a strong case for the Fed to raise interest rates.
Import prices increased 0.2% month-over-month and declined 0.1% excluding fuel. Export prices rose 0.2% and were up 0.4% excluding agricultural exports.
On a yr/yr basis, overall import prices declined 0.2%. Excluding fuel, they were down 0.9%. Export prices were up just 0.3%, versus 3.7% for the 12-months ending in April 2018, and up only 0.7% excluding agricultural products, versus 3.9% for the 12 months ending in April 2018.
The key takeaway is that import prices declined, creating another data point that shows a lack of worrisome inflation pressure.
In a separate report, there was some good news. Specifically, the NFIB Small Business Optimism Index for April jumped to 103.5 from 101.8 in March.