The Dow Jones Industrial Average ($DJI), where many major multinational companies reside, fell several hundred points in the pre-market hours. This echoed the trend from Friday and Monday in which the $DJI felt pressure from tariff talk. President Trump is threatening tariffs on an additional $200 billion in Chinese goods on top of the $50 billion he targeted last week. When you think of trade with China, it’s the major multinationals, chipmakers, and automakers that might come to mind as perhaps having the most to lose if trade relations decline further. Meanwhile, some investors seem inclined to seek safety in Treasuries, where 10-year yields fell below 2.9 percent.

The action this week comes as a reminder that in times of thin market news between earnings seasons, geopolitics can play a major role in shaping the action. Volatility is on the rise, with the Cboe VIX climbing above 14. This could mean some choppy waters ahead, and long-term investors once again might need to harness some discipline and try to ignore the daily noise. However, mid-year is also a good time for long-term investors to check their allocations, so consider looking at your portfolio’s mix of stocks vs. fixed income investments to see if you’re comfortable with the current balance. 

The trend that began last week where small-caps and Nasdaq action split from the Dow Jones Industrial Average ($DJI) appeared to continue Monday and might roll into Tuesday as well. The Russell 2000 (RUT) small-cap index once again set new record highs Monday and Nasdaq climbed as well. Meanwhile, the $DJI couldn’t recover from steep early losses, but finished well above its lows. Major industrial and financial names in the $DJI remain under pressure amid the trade battle between China and the U.S,, while some investors seem to sense that small-caps and tech might be less vulnerable. The Nasdaq is a more technology-oriented index than the $DJI.

Monday’s action kind of resembled Friday’s, with the $DJI and the S&P 500 (SPX) recovering throughout the day after a weak open but not getting back to even. The $DJI finished Monday still below the psychological 25,000 level, though just barely. It was the fifth-straight losing day for the venerable index. From a technical standpoint, a finish above 25,000 today might point toward possible strength. However, if the pre-market trading trends continue, 25,000 appears like it could be a stretch for the index.

Though we’re still in the gap between earnings seasons, this afternoon brings a couple of fresh new results that might be worth watching. The key ones to check are Oracle Corporation (NYSE:ORCL) and FedEx Corporation (NYSE:FDX). Database software firm ORCL has been on a bit of a run, earnings-wise, beating Wall Street’s expectations the last few times out. It continues to face solid competition as it migrates to a cloud-based business model, according to Investor’s Business Daily, with Amazon.com, Inc. (NASDAQ:AMZN) and Microsoft Corporation (NASDAQ:MSFT) among those it’s going up against. Look to see if the company can improve profit margins that have been under pressure.

FDX results could help provide another chapter in the consumer confidence story. Last Friday saw the University of Michigan’s Consumer Sentiment Index rise to 99.3 in early June from 98.0 in May. However, the Expectations Index fell to its lowest level since the start of the year due to less favorable prospects for the overall economy, which were tied in part to higher inflation expectations, the University of Michigan noted. That wouldn’t necessarily affect the previous quarter for FDX that it’s reporting now, but consider listening to the call for a sense of how company leadership might view the near future.

Housing starts and building permits for May come out this morning, and tomorrow brings existing home sales soon after the open. Housing starts of 1.35 million came in slightly above Wall Street analysts’ consensus of 1.32 million, and could be one sign that underneath the trade battle noise, the economy remains basically in good shape. The average Wall Street projection for May existing home sales stands at 5.55 million, according to Briefing.com. That would be up slightly from April’s 5.46 million. Limited inventory and high prices were the big story in April, and that’s unlikely to have changed much in May. Median housing prices rose year-over-year in April for the 74th month in a row, and the percentage of buyers purchasing a home for the first time fell in April from the prior year. First-time buyers is a key metric to watch as investors await signs that strong employment and economic growth might be starting to give younger people confidence and resources to make big purchases.

Of course it does, but just how much? Well, if you’re running a big multinational company like Caterpillar Inc. (NYSE:CAT), Boeing Co. (NYSE:BA) or Deere & Company (NYSE:DE), it matters a lot. That could explain some of the pressure on those three behemoths since China and the U.S. got into a spat late last week. Also, if you’re growing soybeans or investing in an automaker, trade also plays a big role. Still, some analysts look at the market’s recent weakness (which is widely blamed on the trade relationship) and wonder if it’s worth getting so stressed about. Yes, the U.S. imposed 25 percent tariffs affecting $50 billion in Chinese goods, and China fired back with tariffs on a similar amount of U.S. goods. Now the administration is threatening to target another $200 billion of Chinese goods, but remember this administration has often pulled back after making big announcements like that.

“I began the year with a decided upside tilt to my risk profile for growth, reflecting business optimism following the passage of tax reform,” Bostic said in prepared remarks. “However, that optimism has almost completely faded among my contacts, replaced by concerns about trade policy and tariffs. Perceived uncertainty has risen markedly. Projects already underway are continuing, but I get the sense that the bar for new investment is currently quite high. "Risk off" behavior appears to be the dominant sentiment among my contacts.”