Stocks gapped down at the open today (Dow -232 pts; SPX -.9%) after President Trump threatened new trade tariffs on Mexico. Ten of eleven major market sectors are down, led by communications services (-1.3%) and consumer staples (-1.1%). A number of key industry groups are down more than 1%, such as biotechs, retailers and transports. Not surprisingly, gold and gold mining stocks are up on the day. The VIX Index—a common measure of fear among traders—climbed back to 18.3. European markets closed down about 1% and Asia was mostly lower overnight. Interestingly, in the wake of higher trade tensions, China’s Shanghai Composite Index and the S&P 500 Index are down about the same in May, -5%. So we’re certainly not seeing any panic in global stock markets. Commodities are mostly lower in early trading. Gold is up about .9% but oil, copper and iron ire are falling in price. WTI crude oil is down 1.3% to trade at $55.35/barrel. Bonds are mostly higher—especially safe-haven Treasuries. After the Mexico tariff threat, the 10-year Treasury yield fell to 2.17%, the lowest since September 2017.

Investors were caught completely offguard by the president’s Tweet threatening a 5% tariff on goods imported from Mexico. The timing couldn’t be worse, because the White House is trying to move forward with formal approval of the new NAFTA, called United States Mexico Canada Agreement (USMCA). Investors are sounding off. This morning CNBC’s Steve Weiss said this move “doubles down on the negative impact on the economy and instability in the market.” Fellow CNBC Contributor Josh Brown says this isn’t the end of the world, but continued fear about the effect tariffs will have on the economy is hurting investors sentiment. Weak sentiment is “hanging in the air like a miasma.”

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