Monday's trading had a familiar look to it in that the major indices opened noticeably lower and then clawed their way back to much better levels by the closing bell. The S&P 500, which was down as much as 0.8% at one point, finished the day down 0.2%.
Trade concerns were cited as the official pressure point for the broader market and it is clear from the headlines that will continue to be the case today.
The news of note that has everyone talking, and which sent global markets sliding, is the instruction from President Trump to U.S. Trade Representative Lighthizer to identify another $200 billion worth of Chinese goods that would be subject to a 10% tariff if China does not change its practices and implements retaliatory tariffs announced last week.
China has already responded to the latest tariff threat, saying it will defend its interests.
The protectionist approach to trade is testing the mettle of investors, who have responded with an inclination to reduce their risk exposure.
Accordingly, sovereign bond markets are up; the U.S. Dollar Index is up; and global equity markets are down.
China's Shanghai Composite dropped 3.8% on Tuesday; Germany's DAX Index is down 1.3%; and the S&P 500 is projected to open lower by about 1.0%.
Currently, the S&P futures are down 28 points while the Nasdaq 100 and Dow Jones Industrial Average futures are down 92 points and 345 points, respectively.
There is a residual concern abut China making it more difficult for U.S. companies to do business there and a broader concern that the U.S. and China are on the brink of a full-fledged trade war.
Until this point, the U.S. equity market has done a remarkable job shaking off any trade-war jitters. That understanding, however, could leave it vulnerable to an outsized loss if the resilience many participants expect it to show again in the face of negative-sounding trade headlines doesn't persist.
Some might start to think the market has reached a breaking point with its tolerance for the war of words on trade.
We shall see, yet the contentious trade rhetoric is clearly the driving catalyst for today's pre-market weakness.
Separately, a 1.5% decline in oil prices ($64.85, -$1.00) is expected to be a drag on the energy sector. A stronger dollar, a call from Iran to fellow OPEC members to maintain current production levels, and worries that protectionist trade measures will slow global growth are converging to drive oil prices lower this morning.
A drop in long-term rates (10-yr yield down six basis points to 2.87%) and a flattening yield curve, meanwhile, are conspiring to undercut the financial sector, which should be a notable drag at the start of trading.
Early selling interest, though, is going to be broad based. The standing of the futures market suggests as much.
In other developments, housing starts increased 5.0% month-over-month in May to a seasonally adjusted annual rate of 1.350 million (Briefing.com consensus 1.323 million) while building permits declined 4.6% to 1.301 million (Briefing.com consensus 1.343 million).
The key takeaway from the report is that permits -- a leading indicator -- declined for both single-family units (-2.2%) and multi-unit dwellings (-8.8%), suggesting there might not be follow-on strength for badly needed single-family homes in June.
There won't be any other economic releases of note today and it might not have mattered even if there were. The stock market is stuck on trade matters.