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The tariff angst has died down... sort of, but not really.
It died down with the announcements that 25% tariffs for Canada and Mexico will be paused for 30 days, presumably to see if they follow through on the initiatives their leaders discussed with President Trump on the phone. Still, there is the possibility that the tariffs get imposed in 30 days, so this issue hasn't died down really... at least not completely.
It died down some with the softer 10% tariff announced for China... but not really.
China came back and said it will be imposing a 15% tariff on imports of coal and LNG from the U.S., and 10% tariffs on crude oil, agricultural machinery, and certain cars starting February 10. China also imposed further export restrictions on key minerals, such as tungsten, and said it will be starting an anti-monopoly investigation of Alphabet's (GOOG) Google. In other words, this tariff tiff hasn't really died down.
Oh, and by the way, there is a lot of chatter that the EU is going to see the U.S. hit it with tariffs soon.
Everything seems to be in limbo on the tariff front, subject to change for better or worse. The market is trying to hold it together, offering some grace that there won't be a worst-case tariff scenario that invites stagflation, yet it is fair to say that it is dismayed by the uncertainty all the tariff talk has generated.
It is doing its best to compartmentalize things this morning, keeping tariff matters on one side and earnings results on the other.
The latter have been mostly better than expected. Some notable exceptions include Dow component Merck (MRK), cosmetics giant Estee Lauder (EL), food and beverage company PepsiCo (PEP), digital payments company PayPal (PYPL), and consumer products company Clorox (CLX), which disappointed their investors either in absolute terms or relative terms with their results and/or guidance.
Conversely, companies like Palantir Technologies (PLTR), Spotify (SPOT), Pfizer (PFE), and Ferrari (RACE) shared results that pleased their investors. PLTR for its part is up a whopping 24% in pre-market action, giving a momentum boost to other growth stocks.
The equity futures trade itself doesn't have a lot of momentum. Currently, the S&P 500 futures are down three points and are trading fractionally below fair value; the Nasdaq 100 futures are up 19 points and are trading 0.1% above fair value, and the Dow Jones Industrial Average futures are down 99 points and are trading 0.2% below fair value.
The lack of conviction relates in large part to the tariff uncertainty. Spirits maker Diageo (DEO) spoke to that matter in announcing the withdrawal of its medium-term guidance "...due to the current macroeconomic and geopolitical uncertainty in many of its key markets impacting the pace of recovery."
The uncertainty has rankled the Treasury market, too. Yesterday there was a curve-flattening trade that saw the front end underperform and the long end outperform. Today, it is just the opposite. The curve is steepening with the front end outperforming and the long end underperforming.
The 2-yr note yield is unchanged at 4.27% and the 10-yr note yield is up five basis points to 4.59%. Yesterday's move in the 10-yr was linked to growth concerns; today's move will be attributed to inflation worries.
That is some discombobulating action that market participants will likely have to get used to as the tariff talk alternates between heating up and dying down.
