The stock market is going to start today's session on the defensive, undercut by some familiar bugaboos, namely trade and diplomatic tension.
The S&P futures are down 18 points and are trading 0.6% below fair value. That's actually a big improvement from overnight when the S&P futures were down as many 30 points.
The Nasdaq 100 futures are down 53 points (they had been down 96 points) and the Dow Jones Industrial Average futures are down 211 points (they had been down 313 points).
Cutting to the chase, market participants have been caught up in the news that the Trump Administration pressed ahead with the publication of a list of Chinese goods worth $200 billion that will be subject to a 10% tariff if China doesn't change its trade ways.
There will be a two-month review process before those tariffs potentially get imposed, yet China has already said it will pursue countermeasures if they do.
That's the trade tension wrapped up in the futures weakness.
Separately, President Trump called out Germany ahead of the NATO Summit for being "totally controlled by Russia" given the oil and gas deals it has struck with Russia. The president, as expected, also called out other NATO members for inadequate defense spending, saying they are "freeriding" on the U.S.'s defense capabilities.
That's the diplomatic tension wrapped up in the futures weakness.
Now, it probably won't be long before everyone takes a step back and asks this question: Is any of it really a surprise?
The answer should be "no," but when the market has run like this one has the last four sessions, and when the S&P 500 is butting up against an important technical resistance level at 2800, it is not a surprise either that these headlines have triggered a knee-jerk selling reaction.
What we're driving at is that no one should be surprised if the stock market mounts a comeback effort after the opening dip; moreover, don't be surprised if that effort starts to gain some steam around 10:30 ET or so, which has proven roughly to be the "go time" in prior sessions when the market has started on a particularly weak note.
The Producer Price Index for June didn't unwind the tension in the futures market.
The final demand index increased 0.3% (Briefing.com consensus +0.2%), as did the final demand index, less food and energy (Briefing.com consensus +0.2%).
Those monthly increases left the final demand index up 3.4% year-over-year -- the largest 12-month increase since November 2011 -- and the final demand index, less food and energy, up 2.8% versus 2.4% in May.
The key takeaway from the report is that producers are facing increased cost pressures throughout all stages of production, which will fuel concerns about profit margin pressures if they don't pass those costs onto customers and concerns about consumer inflation pressures if they do.
One corporate item of note is the news from Pfizer (PFE) that it plans to reorganize along three business lines at the beginning of the company's 2019 fiscal year.
On a related note, Pfizer also announced that it is going to defer the drug price increase that went into effect July 1 and will keep them there until the president unveils his plan to strengthen the health care system or the end of the year, whichever is sooner. Other drug stocks are trading lower in response to the rollback pricing action.