Can the Bulls Overcome the Challenge of Earnings and Tariffs?
The market has been running higher on intraday strength, but look out for this sign of a shift in market character.
You've reached your free article limit
You've read 0 of 1 free Pro articles.
Investors had much to celebrate this July 4 with a monumental budget bill signed into law, tensions in the Middle East abated, and the S&P 500 closing at all-time highs. There was a surge in patriotism and optimism about the country and the economy, but the stock market faces significant challenges as the focus shifts to earnings reports and the impact of tariffs.
President Trump indicated over the weekend that he intends to send letters to various countries in which he will impose tariffs starting on August 1. This extends the July 9 deadline that was previously set and appears to be a tactic to establish a firm date for finalizing deals.
The Trump administration has been promising a series of trade deals, but so far, only a couple have been finalized, and there have been setbacks with others, such as those with Japan and India.
Tariffs have been out of the spotlight during the budget debate and the Israel-Iran issue, but they are now back at center stage, and there is a tremendous amount of uncertainty about how things will progress. There still is a fierce economic debate about the impact of tariffs, and upcoming economic data will be watched very carefully for signs of sticky inflation and slowing growth.
In addition to tariffs, earnings results will start to hit on July 15 when JPMorgan Chase JPM and Citigroup C report. With the indexes sitting at all-time highs, there is increased danger of a "sell the news" response, especially if management continues to talk about the uncertainty created by trade and tariff policies.
Valuations in many cases are very aggressive, and that will also increase the danger of a sell-the-news response. The market is priced for beat-and-raise earnings reports, but it may be tough to meet expectations after the terrific run many stocks had in the second quarter.
The market is at a very important juncture as the focus shifts to tariffs and earnings. Keep a very close watch on the price action. We have consistently seen intraday strength lately, and the first sign that there are some technical obstacles will be poor closes and intraday reversals to the downside.
We have some early weakness on Monday morning.
At the time of publication, Rev Shark had no positions in any securities mentioned.
