Stocks opened mixed this morning at the mercy of trade-related headlines. The Dow is currently up 70 points and the SPX is flat. The Nasdaq is down slightly The VIX Index back down just a bit to 19. Strangely enough, the utilities sectors is down by more than 1% in early trading. The materials and communications services sectors are down modestly. On the other hand, real estate, industrials and consumer discretionary sectors are up about .3%. Most commodities are trading lower today, save oil. Iron ore is down 1%, copper is down .6%. WTI crude bounced back 1% to trade at $62/barrel on a lower than expected crude inventory report. Bonds are again mixed, with corporates flat and Treasuries up. The 10-year Treasury yield fell back to 2.46%. However, look at junk bonds. The SPDR High Yield Bond ETF (JNK) is actually higher on the day, suggesting the renewed trade fight isn’t the end of the world.

President Trump says China’s vice premier is coming to Washington to “make a deal.” However, the two sides are no closer to that deal than they were yesterday, and the president’s self-imposed deadline—the third of these, by the way—is tomorrow. Asked about the chances of a trade deal, bond fund manager Jeffrey Gundlach sees an “irresistible force meeting an unmovable object. We’re going to keep seeing more tension,” which means more volatility in capital markets. Famed investor Rich Bernstein says the trade blow-up means “more uncertainty with a backdrop of slowing profits.”

Meanwhile, China’s exports fell more than expected in April, causing economists to fret about slowing growth in the world’s second-largest economy. Exports fell 2.7% and imports rose 4%. According to Bloomberg, the report “highlights that the global slowdown is weighing down on China’s growth, instead of the other way around.” We know the Chinese government’s renewed fiscal stimulus has helped to stabilize growth this year. But this report will reawaken investor jitters, especially because higher trade tariffs would certainly hit global trade. The Chinese government cannot afford to 1) avoid a trade deal with the US, and 2) discontinue economic stimulus.

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