Amid Tariff Turmoil, Investors Worry About the 'Big Unknown'
The market keeps rallying each time tariff threats are reduced, but sustained buying is needed to push stocks higher.
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A solid earnings report from Nvidia NVDA helped to hold the indexes steady on Thursday, but tariff uncertainty is the story once again. The big unknown is whether the impact of tariffs will start to be felt in the economic data.
While it is still relatively early, the PCE inflation report that is due at 8.30 a.m. ET will be examined closely for any indication of price pressures. Many economists are convinced that the negative impact of tariffs will be felt soon, but so far, the data have not been there. The earnings report from Gap GAP indicated concerns about a hit of $100 million-$150 million for tariffs, even after mitigation efforts.
There will be another consumer sentiment report on Friday morning, which comes on the heels of a report from the Conference Board survey that 83% of CEOs expect a recession in the next 12 to 18 months.
What has benefited the market and prevented any significant downside on these worries is that there has not been any significant economic data to support the pessimistic view. Anticipation of some negative impact has been building since the tariff issue started, but there isn’t any significant signs of that so far. The market keeps rallying each time tariff threats are reduced and has not reacted at all to the fact that higher tariffs are starting to have some effect on consumers, inflation, and growth.
With the Nvidia earnings report out of the way and the indexes hovering near recent highs, the bulls need to produce some sustained buying to push the market higher and put the February highs into play. The problem is that the news flow just might not be there.
There were two big jumps in May when tariffs were reduced, first on China and then on the European Union. That provided relief, but it didn’t resolve the issues. There is still much work needed to shove the trade issue aside, and Treasury Secretary Bessent indicated that talks with China are already stalling.
So far, technical conditions remain good, but there are signs of stalling and slowing momentum. If the S&P 500 starts to roll over, there are big gaps on the chart that could serve as a magnet for a deeper pullback.
We have a slightly negative open as we await economic reports.
At the time of publication, Rev Shark had no positions in any securities mentioned.
