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Will The Markets Stage a Turnaround Today?

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Pre-market futures are in the green for the first time in several days, after a precipitous drop early this week and last signaling negative impact from the trade war with China once again heating up. After big losses in the major indexes since late-April highs — including a 1300+ point drop on the Dow — it appears as if trading desks are taking a breather for now.

New tariffs put into effect won’t materially hit the marketplace until June 1st — when $200 billion Chinese goods will see a new 25% tariff and $60 billion in U.S. exports to China may face the same fate. In fact, China may target particular American industries for tariffs — such as U.S. agriculture — and certain specific companies, such as Boeing BA and Apple AAPL.

Boeing has already fallen 8.6% from this time a week ago, and is down 30% from its March 1st highs. Meanwhile, the iPhone maker has shed 10.8% in stock value since last Tuesday, down 17.2% from its highs late last summer. Both Boeing and Apple are currently Zacks Rank #3 (Hold)-rated stocks.

Import Prices for April do not contain any impact of recent tariff hikes, of course, and results were lower than had been expected: a headline read of +0.2% is only half of the +0.4% expected. This is also much lower than the unrevised +0.6% reported for March. Ex-petroleum the number falls to -0.6%, indicating that inflation is completely non-existent, with the exception of oil prices.

Exports were a little hotter than expected: +0.2% from the estimated +0.1%. Still pricing pressures for both imports and exports last month are on the light side. Economists have yet to account for a labor market so strained for so long with inflation metrics that unquestionably remain muted at best.

The Federal Open Market Committee (FOMC, aka “The Fed”) meets next month to decide on future interest rate policy. Currently with a Fed funds rate between 2.5-2.75%, no one currently expects a move in either direction. President Trump would love to see the Fed cut rates another quarter point — and, depending on how bad the trade war gets, might actually be considered — but this flies in the face of historical monetary policy with such a robust economy overall.

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