Bessent Teases China Deal, but the Market Will Demand Real Progress
The stock market enjoyed a rebound on Tuesday but hope for improvement alone won't be enough to sustain it.
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The gloom and doom that took hold of the market on Monday evaporated on Tuesday. Worries about tariffs, flight from U.S. assets and an uncooperative Fed were forgotten, and the market not only completely recovered from the sizable losses but also added some gains.
The only substantial news on Tuesday was more talk about positive progress on trade deals, but that has been going on for a while and was totally rejected on Monday. This time, Treasury Secretary Bessent made comments in a private meeting about how there is essential a trade embargo with China and that the situation is not sustainable. He stated that "negotiations with China haven’t started, but a deal is possible." Bessent is scheduled to speak at 10 a.m. ET on Wednesday about the state of the financial system.
The trading action was pretty much the inverse of what we suffered on Monday. Breadth was stellar, with around 8,500 gainers to just 1,300 decliners. It was a sea of red, with all 101 stocks in the Nasdaq 100 QQQ finishing with gains.
What is needed now is some actual trade deals and not just more promises about what is coming. The market is growing very impatient and won’t be friendly if something is not solidified soon.
The Tesla TSLA report is out and is showing misses on both the top and bottom lines. Expectations were not very high, so the stock is still up for the day but off its highs. The big question on the upcoming call will be whether or not Elon Musk will be coming back and will be more active again in management. The numbers aren’t that important at this point, but guidance is key.
There are many more earnings reports coming up, with Google GOOGL being particularly important on Thursday night.
Technically, the market is in much better shape after this vigorous recovery, but that last big jump did not lead to sustained momentum. We need some good news flow to keep things running, which means less uncertainty about trade and tariffs.
Have a good evening. I’ll see you tomorrow.
At the time of publication, DePorre had no positions in any securities mentioned.
