The S&P has caught a bid, and is now down just 0.1%, with the Nasdaq similarly wiping out most early losses, following a report that contrary to previous speculation that Trump's bombastic "fire and fury" statement was a coordinated and pre-agreed upon indication of intent from the entire White House, it was in fact improvised. As the NYT writes, "President Trump delivered his “fire and fury” threat to North Korea on Tuesday with arms folded, jaw set and eyes flitting on what appeared to be a single page of talking points set before him on the conference table at his New Jersey golf resort. The piece of paper, as it turned out, was a fact sheet on the opioid crisis he had come to talk about, and his ominous warning to Pyongyang was entirely improvised."

The NYT also adds that "in discussions with advisers beforehand, he had not run the specific language by them", which has prompted a modest relief rally as it now appears that Trump's widely reported statement was just another ad hoc outburst - in line with his daily Twitter rants - and one which will likely be moderated in future appearances after feedback from Trump's advisors. 

To be sure, in the hours since, the president’s advisers have already sought to calm the situation, with Rex Tillerson assuring Americans that they “should sleep at night” without worrying about an imminent war, as we reported earlier.

As for the advisory split on how to handle North Korea, the NYT notes that that the president’s aides are "divided with national security veterans like Defense Secretary Jim Mattis and Lt. Gen. H.R. McMaster, the national security adviser, on one side and Stephen K. Bannon, the president’s chief strategist, and his allies on the other."

While General McMaster and others consider North Korea a pre-eminent threat that requires a tough response, Mr. Bannon and others in the nationalist wing argue that it is really just a subset of the administration’s conflict with China and that Mr. Trump should not give more prominence to an unstable rogue operator like Kim Jong-un, North Korea’s leader.

Mr. Bannon’s allies in the alt-right media and activist groups have been waging a ferocious public attack against General McMaster, characterizing him as soft on issues like Iran, Israel and terrorism and promoting a hashtag #FireMcMaster. They are angry that General McMaster has pushed out several hard-liners associated with Mr. Bannon from the National Security Council staff. Mr. Trump came to General McMaster’s defense last week with a statement expressing confidence in him.

Still, according to the report, the one voice pushing for a North Korean de-escalation is that of Steve Bannon who has been arguing against what his side considers the excessively militant approach of the “war party” of General McMaster. As a result, while Trump's comment may have been indeed improvised, it merely reflect the will of both McMaster and Kelly, something we predicted two weeks ago when we commented on the appointment of Trump's new Chief of Staff. Furthermore, while Bannon has his own channel to the president, he has been shut out of most formal discussions of North Korea by the national security team.

In any case, neither camp advocated language like “fire and fury,” according to the NYT sources. Among those taken by surprise, they said, was John F. Kelly, the retired four-star Marine general who has just taken over as White House chief of staff and has been with the president at his golf club in Bedminster, N.J., for his working vacation.

Whatever the politics behind the White House split on North Korea, stocks have taken the news in stride and as the VIX taking a hit, both the S&P and the Nasdaq have risen to session lows, even as the Dow continues to feel the pain from yesterday's Disney breakup with Netflix.