Investors Are Ready to Hit the 'Eject' Button at the First Sign of This
Momentum has been slowing, despite positive news flow, with the last big gain in the S&P 500 on May 27.
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Tariff and trade uncertainty is weighing on the market on Thursday morning as investors await the PPI inflation data. President Trump has indicated that there are 15 countries, including Japan and South Korea, that are waiting to finalize trade deals, but the rest of the world may see unilateral tariffs in the next two weeks or so.
In addition, Commerce Secretary Howard Lutnick indicated that negotiations with the European Union are "more than thorny," and a deal probably won’t come until the very end of the process of tariff negotiations. While Trump is pleased with the trade truce with China, there still is very little clarity on when a more complete deal might be made.
The trade and tariff news is coming a day after some better-than-expected inflation news in the form of CPI, which did not receive a very positive response from the market. It was another piece of positive data in the face of persistent pessimism, but the bears are insistent that the impact of tariffs will be felt soon and that there will be indications of slowing growth and sticky inflation.
PPI will be out at 8.30 am ET and is more likely to reflect the impact of tariffs than CPI because it measures prices at the wholesale level, which is a precursor to retail price levels. There has been a rush to prepare for potential tariffs that have caused some distortions in this report in recent months, but it is now a better measure of what is actually happening.
This news flow is hitting as the indexes are showing signs of stalling, just as the S&P 500 and Nasdaq 100 QQQ are on the brink of testing the highs that were hit in February. Despite some positive news flow, momentum has been slowing. There has been steady upside progress, but it has been very slow without any large percentage gains. The last big gain in the S&P 500 was on May 27 on news of tariff delays.
Bears remain convinced that weaker economic data is inevitable and will start to hit soon. They have been anticipating that for a while and have been on the wrong side of the action as a result. It is likely that many market players have their fingers on the "eject" button at the first sign of any economic weakness in the data.
At the time of publication, Rev Shark had no positions in any securities mentioned.
