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Briefing.com Summary:
* A risk-off tone dominates after President Trump threatens new tariffs for countries opposing a U.S. acquisition of Greenland.
*Deficit concerns are contributing to an increase in sovereign bond yields.
*Netflix has committed to an all-cash offer to acquire Warner Bros. Discovery.
Coming off the long holiday weekend for the U.S., markets here and elsewhere are under selling pressure that is wrapped up in geopolitical angst after President Trump threatened new tariff actions on European countries opposing the U.S. acquisition of Greenland.
The added rub is that these tariff actions, which call for a 10% tariff on imported goods effective February 1, before rising to 25% on June 1 if a deal for the U.S. to acquire Greenland has not been reached, are targeted at eight NATO members, with the UK, Germany, and France chief among them.
Currently, the S&P 500 futures are down 108 points and are trading 1.6% below fair value, the Nasdaq 100 futures are down 471 points and are trading 1.8% below fair value, and the Dow Jones Industrial Average futures are down 718 points and are trading 1.5% below fair value.
The main concern wrapped up in those indications is that the tariff threat provokes retaliatory actions by the EU, triggering a new trade war. The residual and overarching concern is that a possible military move by the U.S. to take Greenland destroys the fabric of NATO.
Notably, there isn't a flight to safety in U.S. Treasuries this morning. The 2-yr note yield is unchanged at 3.59%, and the 10-yr note yield is up six basis points to 4.29%, with worries about higher prices and the cost associated with acquiring Greenland factoring into the selling of longer-dated securities.
Sovereign bond yields, in general, are higher as fiscal deficit concerns mount.
The fallout isn't more pronounced because the EU, thus far, has held off on retaliatory action, and the media is reporting that President Trump will meet with European leaders at the World Economic Forum in Davos this week to discuss the situation. In other words, hope for a diplomatic solution, and hope that this flashpoint can be de-escalated, remains.
Nonetheless, there is heightened uncertainty at the moment that is squelching buying interest in the equity market and stoking buying interest in gold ($4,727.20, +131.80, +2.9%) and silver ($95.23, +6.69, +7.6%) futures. The U.S. Dollar Index is down 1.0% to 98.39.
This macro development has overshadowed the earnings reports from 3M (MMM), Fifth Third (FITB), U.S. Bancorp (USB), and D.R. Horton (DHI), as well as the news that Netflix (NFLX) has now committed to an all-cash offer to acquire Warner Bros. Discovery (WBD) for $27.75 per share and that the president could possibly name his pick for Fed Chair early next week.
It will be a noticeably lower open for the major indices, so traders will be watching closely if there is a committed action to "buy the dip" or some lingering resolve to sit things out for now.
