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The stock market was dealing with tariff and trade matters yesterday, and it looks like it will be doing that again today. Specifically, Treasury Secretary Bessent said the U.S.-China trade talks are "a bit stalled," and President Trump more recently said that China has violated its preliminary agreement with the U.S.
The equity futures were a bit softer in front of the president's clarification, with participants waiting anxiously for the Personal Income and Spending Report for April, but they took another leg lower after the president's view became known.
Currently, the S&P 500 futures are down 22 points and are trading 0.4% below fair value, the Nasdaq 100 futures are down 73 points and are trading 0.4% below fair value, and the Dow Jones Industrial Average futures are down 127 points and are trading 0.3% below fair value.
Once again, market participants have been given a lot to chew on. The trade matters are one thing. Another thing is the cadence of earnings results since yesterday's close, which had mixed overtones.
Dell (DELL) and ZScaler (ZS) were some standouts in the technology arena, while retailers American Eagle (AEO) and Gap (GAP) both provided some concerning results and/or guidance.
The macro situation, though, is the main focal point, and it appears that the U.S.-China trade tussle is taking precedence in terms of mindshare this morning, because the macro data at 8:30 a.m. ET looked pretty encouraging.
Briefly, personal income increased a robust 0.8% month-over-month in April (Briefing.com consensus 0.3%) following an upwardly revised 0.7% increase (from 0.5%) in March. Personal spending rose 0.2% month-over-month, as expected, following an unrevised 0.7% increase in March.
The PCE Price Index was up 0.1% month-over-month, as expected, which left it up a palatable 2.1% year-over-year. The core-PCE Price Index was also up 0.1%, as expected, leaving it up 2.5% year-over-year.
The key takeaway from the report is manifold: inflation rates are moderating, personal income growth is strong, and the personal savings rate picked up to 4.9% from 4.3% in March, which points to pent-up spending potential that will keep the economy on a growth track in the second quarter.
Separately, there was a stunning drop in the trade deficit for goods in April. According to the Advance International Trade in Goods Report, the goods deficit dropped to $87.6 billion from -$163.3 billion in March.
The equity futures market improved, and Treasury yields bounced following these reports, but the turn in both markets was held in check. The 10-yr note yield is unchanged at 4.43%.
That is a bit surprising, although there are competing reports today that there could be some month-end rebalancing on the part of pension funds out of stocks (which have done great in May) and into bonds (which have not done great in May) that could be acting as a restraint on the post-report reactions.
