One of my favorite things to do is to push back on news media bandwagons with indignation and incredulity.  Today provides a great opportunity for that because stocks are starting off weaker and most media outlets seem to be focused on the wrong stuff, or rather, only focused on one thing.  Specifically, the announcement of new China-specific tariffs is said to be driving stocks and bond yields lower.  Balderdash!  Sort of...

Yes, China tariffs have been a market mover this week, but they're not the only consideration today.  Tariffs were a big deal on Monday, and at that time, I would agree there was a solid correlation with stock market weakness.  In fact, one could argue that stocks set the tone on Monday and that tariffs were partly responsible for that (even though plummeting Facebook stock got the most attention).  Either way, the news was definitely already making the rounds by then.

The overnight market movement (today) is a different story.  The cat is out of the bag on China tariffs, and a comment from the White House that the announcement will come today is not much of a surprise.  Moreover, stocks didn't begin to move lower until European markets opened (as seen in the chart below).  

2018-3-22 open

The fact is that domestic markets are always curious to find out how Asia and Europe will react to a big Fed announcement.  I'd go so far as to say we don't even see the full reaction to the Fed until overseas markets have had their input.  In today's case, their input was moderately favorable for bonds--hence the additional gains this morning.

But if bonds are happy because the Fed Chair came across as "accommodative" yesterday, we'd also expect stocks to take heart (they like an accommodative Fed too!).  But European markets sold stocks due to a vast majority of the day's economic data (in Europe) coming in weaker than expected.  This stoked the fires of bond buying as well, thus pulling even more money out of stocks as money managers adjust stock vs bond allocations.  Somewhere in all that mess you likely have a bit of additional impact from the apparent official/final announcement of China tariffs later today, but the point is that it's not today's only news and possibly not even the biggest news.

MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.
FNMA 3.5
99-29 : +0-09
10 YR
2.8208 : -0.0862
Pricing as of 3/22/18 9:13AMEST

Tomorrow's Economic Calendar
Time Event Period Forecast Prior
Thursday, Mar 22
8:30 Jobless Claims (k) w/e 225 226
10:00 Leading index chg mm (%) Feb 0.5 1.0