Overnight Markets and News

June S&P 500 E-minis (ESM18 -1.43%) this morning are sharply lower as China overnight very quickly retaliated to the Trump administration's announcement late Tuesday of the list of $50 billion worth of Chinese products subject to tariffs for IP violations. The Euro Stoxx 50 index this morning is down -1.27%.

China's retaliation was announced after some of the Far East Asian stock markets had already closed, which means that some of the Asian stock market closes do not reflect the news. The announcement was made about 20 minutes before the Hong Kong stock market closed, accounting for today's plunge in the Hang Seng index by -2.19%. Other Asian closes: Japan Nikkei index +0.13%, China Shanghai -0.18%, Australian S&P 200 +0.16%, Singapore -2.12%, South Korea KOSPI 200 -1.54%, India -1.05%, Turkey -1.05%.

China early Wednesday very quickly announced the list of 106 U.S. products worth about $50 billion that will be subject to an additional 25% tariff in retaliation for the U.S. tariffs on $50 billion worth of Chinese goods. The list of U.S. products subject to the new tariff includes soybeans, automobiles, chemicals, and aircraft. Other U.S. ag products subject to the tariff include wheat, corn, cotton, sorghum, tobacco, and beef. The U.S. sold about $14 billion worth of soybeans to China last year accounting for about one-third of the entire U.S. soybean crop.

Boeing's stock is sharply lower by -7% in overnight trading since the tariffs will apply to at least some Boeing jets. About one quarter of Boeing's aircraft sales deliveries last year were to China. Boeing's sharp drop accounts for the larger drop in Dow futures prices this morning versus S&P 500 futurs.

China said the implementation date for the tariffs will depend on when the U.S. levies its tariffs. The U.S. process is that there will be about a 60-day public comment period and then the U.S. Trade Representative has up to 6 months to decide on the final tariffs. Written public comments can be submitted until May 11 and a public hearing has been scheduled for May 15. That means there is still time for the two sides to negotiate to see if there is a compromise that could avert the tariffs.

The dollar index (DXY00 -0.12%) this morning is slightly lower by -0.102 (-0.11%) while EUR/USD (^EURUSD +0.07%) is up +0.0022 (+0.18%). USD/JPY (^USDJPY -0.35%) is down -0.46 (-0.43%) due to safe-haven buying of the yen. June 10-year T-note prices (ZNM18 +0-075) are up +8.5 ticks on safe-haven demand with the turmoil in stocks and on uncertainty about the impact of the tariffs on the U.S. economy and Fed policy.

May WTI crude oil this morning is down -1.21 (-1.91%) and May gasoline is down -0.0238 (-1.21%). Precious metals prices are higher this morning on safe-haven buying with June gold up +9.8 (+0.73%) and May silver up +0.033 (+0.20%). However, May copper is sharply lower by -0.071 (-2.30%).

In the ag markets, May corn is down -13.50 (-3.47%), May soybeans are down -44.25 (-4.26%), and May wheat is down -7.25 (-1.58%). Livestock futures have yet to open. Softs are lower with morning with May sugar down -0.11 (-0.88%), May coffee down -0.10 (-0.09%), May cocoa down -26 (-1.04%), and May cotton down -2.05 (-2.50%).

China was forced into a big $9.7 billion bailout of Anbang Insurance Group to save the company from insolvency after the government recently accused Anbang's former Chairman Wu Xiaohui with fraud for financing the company with unauthorized investment-type policies.

U.S. Stock Preview

Key U.S. news today includes: (1) weekly MBA mortgage applications (previous +4.8% with purchase sub-index +3.1% and refi sub index +7.3%), (2) Mar ADP employment (expected +210,000, Feb +235,000), (3) St. Louis Fed President James Bullard (non-voter) speaks on the economy and monetary policy to the Arkansas Bankers Association, (4) final-Mar Markit U.S. services PMI (expected +0.1 to 54.2, prelim-Mar -1.8 to 54.1), (5) Mar ISM non-manufacturing PMI (expected -0.5 to 59.0, Feb -0.4 to 59.5), (6) Feb factory orders (expected +1.7%, Jan -1.4% and +0.4% ex transportation), (7) EIA weekly Petroleum Status Report, (8) Cleveland Fed President Loretta Mester (voter) speaks on diversity in economics at Central State University in Wilberforce, OH.

Notable Russell 1000 earnings reports today include: Lennar (consensus $0.80), CarMax (0.87), Acuity Brands (2.09).

U.S. IPO's scheduled to price today: none.

Equity conferences this week: none.

Market Comments

June S&P 500 E-minis (ESM18 -1.43%) this morning are sharply lower by -1.7% after China quickly retaliated to the Trump administration's latest round of tariffs. Tuesday's closes: S&P 500 +1.26%, Dow Jones +1.65%, Nasdaq +1.06%. The S&P 500 on Tuesday closed sharply higher on some optimism that Asian and European stocks on Tuesday saw only minor losses compared with Monday's plunge in the U.S. stock market. There were also slightly reduced trade concerns after USTR Lighthizer said the administration has a long-term trade strategy. Automakers saw strength after reporting positive sales results.

June 10-year T-note prices (ZNM18 +0-075) are up +8.5 ticks on safe-haven demand with the turmoil in stocks and on uncertainty about the impact of the tariffs on the U.S. economy and Fed policy. Tuesday's closes: TYM8 -13.5, FVM8 -8.5. Jun 10-year T-notes on Tuesday closed with fairly sharp losses on the upward rebound in stocks, which reduced safe-haven demand for T-notes. T-note prices were also undercut by the +3 bp rise to 2.09% in the 10-year breakeven inflation expectations rate due in part to the +0.79% rally in May crude oil.

The dollar index (DXY00 -0.12%) this morning is slightly lower by -0.102 (-0.11%) while EUR/USD (^EURUSD +0.07%) is up +0.0022 (+0.18%). USD/JPY is down -0.46 (-0.43%) due to safe-haven buying of the yen. Tuesday's closes: Dollar Index +0.148 (+0.16%), EUR/USD -0.0032 (-0.26%), USD/JPY +0.72 (+0.68%). The dollar index on Tuesday closed mildly higher on reduced trade tensions and the upward rebound in U.S. stocks, which attracted some capital back to the U.S. The dollar was also boosted by the improvement in U.S. interest rate differentials with the fairly large rise in T-note yields. There was a solid +0.72% rally in USD/JPY on reduced safe-have demand for the yen due to the upward rebound in U.S. stocks.

Precious metals prices are higher this morning on safe-haven buying with June gold up +9.8 (+0.73%) and May silver up +0.033 (+0.20%). However, May copper is sharply lower by -0.071 (-2.30%). Tuesday's closes: Jun gold -9.60 (-0.71%), May silver -0.280 (-1.68%), May copper +1.35 (+0.44%). Metals on Tuesday settled mixed. Precious metals prices fell on reduced safe-haven demand caused by the rally in stocks. Precious metals prices also fell on long liquidation pressure after Monday's sharp rallies.

May WTI crude oil this morning is down -1.21 (-1.91%) and May gasoline is down -0.0238 (-1.21%). Tuesday's closes: May crude +0.50 (+0.79%), May gasoline +0.0080 (+0.41%). May crude oil and gasoline on Tuesday closed moderately higher on the the recovery in the U.S. stock market, which encouraged capital flows back into commodities, and on Bloomberg's report that OPEC's production in March fell by -170,000 bpd to a 1-year low 32.04 million bpd due in large part to Venezuelan production woes. Crude oil prices were undercut by the consensus that Wednesday's weekly EIA report will show a +2 million bbl rise in U.S. crude oil inventories.

Overnight U.S. Stock Movers

Boeing (BA +2.60%) is sharply lower in pre-market trading after China said it would slap a 25% tariff on U.S. products including aircraft.

Dave & Buster's (PLAY +1.50%) fell 3% in after-hours trading after issuing guidance for fiscal year revenue that was about 2% below the consensus.

Cloudera's (CLDR +4.76%) plunged 18% in after-hours trading after its annual revenue forecast was 4% below the consensus.

Aehr Test Systems (AEHR +1.34%) rallied 15% in after-hours trading on larger-than-expected Q3 revenue and news of a follow-on order.

Landec's (LNDC +1.53%) fiscal Q3 EPS report of 58 cents easily beat the consensus of 9 cents.

Viacom (VIAB -3.70%) fell marginally in after-hours trading after a report that CBS submitted its bid for Viacom, signaling the beginning of deal talks.

PTC Therapeutics (PTCT +0.58%) fell 4% in after-hours trading after a ratings downgrade from Barclays due to a lack of revenue upside.