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The trade in the equity futures market this morning is reminiscent of what was witnessed ahead of yesterday's open. There is weakness across the board, with some weakness in the mega-cap stocks doing most of the driving.
Currently, the S&P 500 futures are down 47 points and are trading 0.8% below fair value, the Nasdaq 100 futures are down 226 points and are trading 1.1% below fair value, and the Dow Jones Industrial Average futures are down 271 points and are trading 0.7% below fair value.
We'll label this as the continuation of a consolidation trade following the huge rebound by the market off the April 7 lows. There is a smattering of tariff concerns in the mix, however, that are tied not so much to what is happening now but to the fear of what might come later for the economy and earnings if the high tariff rates persist.
Those concerns are wrapped up in the indications from Ford (F) and Mattel (MAT), both of which exceeded first quarter earnings expectations, that they are holding off on providing full-year guidance.
Ford's explanation is that there are material near-term risks that make updating full-year guidance challenging given the potential range of outcomes. Mattel said it is pausing guidance given the volatile macro-environment and evolving U.S. tariff landscape.
Now, other companies have been able to provide full-year guidance, yet the holdback by Ford and Mattel is illustrative of the general visibility issues that have been introduced with the tariff announcements.
Those announcements led to a lot of order frontrunning by businesses to get ahead of the higher tariff rates. That was plain to see in the March Trade Balance Report.
The trade deficit widened to a record $140.5 billion in March (Briefing.com consensus -$127.5 billion) from a downwardly revised $123.2 billion (from -$122.7 billion) in February. The widening was the result of March exports being $0.5 billion more than February exports and March imports being $17.8 billion more than February imports.
The key takeaway from the report is the surge in imports, which detracted sharply from Q1 GDP, and was highlighted by a $22.5 billion increase in imports of consumer goods that was led by a $20.9 billion increase in pharmaceutical preparations.
On a related note, President Trump signed an executive order to reduce regulatory barriers to domestic pharmaceutical manufacturing; meanwhile, CNBC also reported that President Trump said he will announce specific pharmaceutical tariffs in two weeks.
Trade matters will remain a topic of conversation today, with Canadian Prime Minister Carney and President Trump meeting at 11:45 a.m. ET at the White House.
The 2-yr note yield is down five basis points to 3.79%, the 10-yr note yield is down one basis point to 4.33%, and the U.S. Dollar Index is down 0.4% to 99.47. Those moves, and the moves by the equity futures market, will be associated with risk-off behavior.
