The bad news is that the S&P 500 futures are down 34 points and are trading 1.3% below fair value. The good news is that they had been down as many as 54 points and 2.1% below fair value.
In either case, the message is clear: the stock market is going to begin today on a decidedly lower note.
The catalyst for the negative disposition, which also has the Nasdaq 100 futures and Dow Jones Industrial Average futures trading 1.6% and 2.0%, respectively, below fair value is the news that China has announced additional tariffs on 106 products imported from the U.S. to China with an import value of approximately $50 billion.
This tariff action, which has yet to be formally implemented, includes soybeans, planes, autos, and chemicals, which highlights for investors that China is going to take off the gloves if it has to in this trade fight.
China's announcement was in response to new tariff measures proposed by the Office of the United States Trade Representative for approximately $50 billion of products imported from China. This proposal will be subjected to a comment period, so it isn't going into effect immediately either.
The latter point notwithstanding, market participants are bothered by the tone of these announcements and the realization that they are going to breed uncertainty that is apt to slow business investment and global economic activity as everyone waits to see if there is some real bite behind all of the barking and whether this devolves into a true trade war.
There is a minor allowance being made that this is all just part of negotiating tactics, yet the knee-jerk response in the futures market to the headlines implies the market doesn't like where things are headed since these trade matters pose a risk to the high expectations for economic and earnings growth that were the basis for the 2017 year-end rally and the spike to begin the year.
That spike has been undone and then some as valuation concerns, worries about the Fed operating with a tightening bias, and increased volatility have led to some collective de-risking in the stock market. The trade issues, meanwhile, have provided a rationale to sell into strength as they have exacerbated the market's sense of uncertainty about the outlook.
That's why it hasn't taken as much solace as one might have expected from good economic news like today's ADP Employment Change Report for March and repeated reminders that first quarter earnings growth is shaping up to be the best quarter of earnings growth in seven years.
The market's pre-occupation right now is wrapped up in concerns that neither economic nor earnings growth will live up to high expectations as the year progresses; hence, there is less willingness to pay up for every dollar of earnings than there had been in the recent past when the market felt assured that the Federal Reserve wasn't going to take away the punch bowl.
In terms of the ADP Report, it showed an estimated 241,000 jobs were added to private sector payrolls in March (Briefing.com consensus 203,000) after an upwardly revised 246,000 (from 235,000) for February.
This report should solidify expectations for another strong nonfarm payrolls number when the government releases the Employment Situation Report on Friday.
That consideration isn't making much of a difference at the moment since the dust kicked up by the trade headlines has made it difficult for market participants to see the light that used to be blinding.