Tariff tensions.

With more tariff slings and arrows launched between the US and China overnight, the market once again makes a big overnight reversal.  As the tensions escalate, traders will have a decision to make as we head into the weekend.  Do you hold and accept the risk of possible big Monday gaps or do you take close positions to avoid the risk?  A tough decision to be sure.

The Employment Situation report this morning is expected to show our economy is strong.  However, the market is also walking a tightrope here due to the possible wage inflationary pressures.  As in the Goldilocks nursery rhyme, we need the porridge to be just right, or additional market concerns could also contribute to market volatility.  One thing seems certain; big daily price fluctuations are likely here to stay at least for the short-term.

On the Calendar

The Friday Economic Calendar has only one market-moving report at 8:30 AM Eastern.  The Employment Situation report is expecting about 185,000 in jobs growth in March non-farm payrolls.  The unemployment rate according to consensus declines to 4.0% pointing to the full employment and the possibility of future wage pressures.   However, consensus only expects a 0.3% increase in hourly earnings with a yearly uptick to 2.7%.  Manufacturing payroll is expected to increase by 20,000 with the average work week coming in unchanged at 34.5 hours.  Consensus also sees the labor participation rate ticking higher by two tenths to 62.8%  We have three Fed Speakers today with first at 10:30 AM and the second speaking at 1:30 PM and last talking at 4:00 PM.

A rather light day on the Earnings Calendar this Friday with only 17 companies expected to report results.

Action Plan

After two nice days of the market rally on decreasing fears of tariff uncertainty, the White House stepped up the rhetoric asking for another 100 billion in tariff increases.  There was an instant knee-jerk reaction with the Dow Futures quickly sinking more than 400 points after the news release.  Of course, China quickly responded with reciprocal threats.  Throughout the evening the Futures markets rallied back significantly but at this time indicate the Dow could gap down about 200 points at the open.

Such political uncertainty will likely keep the markets nervous and price action very volatile for the foreseeable futures.  As I mentioned yesterday traders will have to plan for this additional volatility and carefully weigh the risk because these big overnight reversals can be very punishing to your trading accounts.  Maintaining an edge is all but impossible with such politically charged volatility.

Trade Wisely,

Doug