There has been a significant change in the trading tone this morning. The futures for the major indices are sharply higher, which is setting the stage for large gains in the cash indices at today’s open.<\/p>\n\n\n\n
Currently, the S&P 500 futures are up 123 points and are trading 2.5% above fair value, the Nasdaq 100 futures are up 405 points and are trading 2.3% above fair value, and the Dow Jones Industrial Average futures are up 1,034 points and are trading 2.7% above fair value.<\/p>\n\n\n\n
This is a relief trade tied up in the idea that the Trump administration is open to tariff negotiations. That sense of things started to percolate yesterday when Treasury Secretary Bessent said he has been tasked, along with U.S. Trade Representative Greer, to start negotiations with Japan. Furthermore, President Trump suggested to reporters yesterday that, while there could be some permanent tariffs, there could also be negotiations.<\/p>\n\n\n\n
The negotiating tack is also evident in Treasury Secretary Bessent’s acknowledgment that 70 countries want trade talks and that everything is on the negotiating table, noting that it will be a busy three months, according to Bloomberg<\/em>.<\/p>\n\n\n\n That last part is important, as it conveys an “endgame” of sorts for working out better tariff terms in a defined period. It also coincides with what will likely be a pivot to a more focused effort on the administration’s tax cut plans in the back half of the year (the 2017 tax cuts expire at the end of 2025).<\/p>\n\n\n\n The elephant in the tariff room right now, however, is China. Recall that President Trump said yesterday, too, that the U.S. will place an additional 50% tariff on goods imported from China, starting Wednesday, if China did not retract the 34% counter-tariff it is planning for imported U.S. goods. <\/p>\n\n\n\n China’s Ministry of Commerce said the threat to escalate tariffs in China is a mistake and that China will not accept it and will fight to the end.” Enter Treasury Secretary Bessent again, who told CNBC<\/em> this morning that it was a mistake for China to have escalated the tariff situation. Coincidentally, China fixed the yuan midpoint at its weakest level since September 2023.<\/p>\n\n\n\n So, yeah, there’s that matter — no small thing — still hanging out there along with the unknown of how tariff matters with the EU are going to play out, but for now, a rebound trade is on order for today’s open.<\/p>\n\n\n\n