S&P 500; US Indexes Fundamental Daily Forecast – Early Downside Reaction to Additional Tariff News Relatively Mild

If the early price action is any indication, traders face a mountain of volatility on Friday. Not only do investors have to deal with the March U.S. Non-Farm Payrolls report, but also a possible escalation of the trade war between the United States and China.

After posting solid gains on Thursday on top of a major upside reversal the previous session, the major U.S. stock index futures contracts are trading sharply lower early Friday.

At 0540 GMT, June E-mini S&P 500 Index futures are trading 2631.75, down 30.00 or -1.14%. The June E-mini Dow Jones Industrial Average is at 24162, down 306 or -1.25% and the June E-mini NASDAQ-100 Index is trading 6514.25, down 86.00 or 1.30%.

The early price action looks like a textbook reaction to the news by professional portfolio managers. They started taking protection from the start of the session in reaction to the news that President Trump had instructed U.S. trade officials to consider $100 billion in additional tariffs on China.

Trump said in a statement on Thursday that further tariffs were being considered “in light of China’s unfair retaliation” against earlier U.S. trade actions that have triggered volatile responses in the global financial markets.

The reaction in Asia is mixed on Friday. The timing of the news about additional tariffs prevented Asian traders from participating in Thursday’s U.S. stock market rally. However, the selling pressure wasn’t as strong as the move we saw last month or even earlier this week.

Although the news may have caused an initial sell-off, traders look a little reluctant to press the stock market further lower because some feel that the move could be part of Trump’s negotiation tactics and that the tariffs won’t officially be implemented until a public comment process is concluded.

In response to Trump’s latest proclamation, China state media responded by slamming it as “ridiculous”. “This latest intimidation reflects the deep arrogance of some American elites in their attitude towards China,” the state-run Global Times said in an editorial.