It was a rough outing for the stock market on Tuesday and it appears as if it is going to suffer some additional jabs at today's open. Currently, the S&P futures are down nine points and are trading 0.1% below fair value. The Nasdaq 100 futures are down 39 points and are trading 0.2% below fair value. The Dow Jones industrial Average futures are down 61 points and are trading 0.1% below fair value.
Yesterday's hangup -- trade deal angst -- is today's hangup as well.
Reuters is reporting that China angered President Trump's by backtracking on nearly every aspect of the negotiated language of the trade deal that was getting worked out, showing resistance in particular to changes in Chinese law.
If this report is accurate, it suggests these negotiations are going to be elongated and perhaps unsuccessful altogether, as the Washington Post is reporting separately that the president remains intent on forcing China's hand to correct unfair trade practices.
This uncertainty is at the heart of the weakness in the futures market, yet there is more in play as a basis for buyers to back off.
China also reported some mixed trade balance data for April that included a 2.7% yr/yr decline in exports and a 4.0% yr/yr increase in imports. The export weakness is playing into concerns about a slowdown in global growth.
Iran, meanwhile, is reportedly going to back out of some of its commitments in the 2015 nuclear deal, as it sees a lack of economic support from other signatories in the face of U.S. sanctions. At the same time, the Washington Post is reporting that Secretary of State Pompeo has gone to Baghdad on matters pertaining to increased tension with Iran.
These reports are playing into geopolitical concerns.
Trade uncertainty, economic uncertainty, and geopolitical uncertainty, then, are in the mix along with general concern about valuation and the market's technical posture.
The S&P 500 flirted with its 50-day moving average (2858.56) at yesterday's low and it is still fighting with double-top contentions given the relatively weak push it made in moving to a new all-time high.
The CBOE Volatility Index spiked 25% yesterday and bonds continue to benefit from safe-haven positioning, exposing a defensive mindset that has taken root this week as prior assumptions about an earnings acceleration in the back half of the year are being put to the test by the negative turn of events in the trade negotiations.
That can all change in a hurry in a well-timed tweet or it can get worse. Sure enough, there has been some notable improvement in the futures market in the past few minutes on a tweet from the president that indicates Vice Premier Liu He is coming to Washington "to make a deal." He added, "we'll see."