Poor Economic News Is No Obstacle for the Mighty Bulls. Here's My Game Plan.
Earnings from Microsoft and Meta are set to fuel an eighth straight day of gains.
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Earlier in April, the Wall Street Journal wrote that the stock market was on pace for its worst April since the middle of the Great Depression in 1932. The action looked catastrophic on April 8 after President Trump imposed across-the-board tariffs.
The next day, Trump reversed course on tariffs, and the indexes had their biggest point gain in history. There was more volatility in the next eight or nine sessions, but then a steady uptrend started. The S&P 500 is up seven straight sessions and looks set for an eighth as the stock gap is higher on Thursday morning.
The worst April since 1932 turned out to be close to unchanged when all was said and done. It is a fascinating history, but now what?
Microsoft MSFT crushed low expectations on Wednesday night and is indicated about 9% higher early Thursday. Meta META also surpassed expectations and is up about 6% in early Thursday trading. In both cases, the tariff turmoil was not nearly as impactful as anticipated, and management was able to provide much better guidance than expected.
The story may be a bit different when Apple AAPL and Amazon AMZN report on Thursday night. Both companies face much more difficulty because of the large amount of business they do with China. Neither Microsoft nor Meta has nearly the same exposure to China as Apple and Amazon. It will be much more difficult for Apple and Amazon to be able to provide guidance.
For now, the market is celebrating a return of the Magnificent Seven MAGS but Apple is not participating and is indicated lower on Thursday morning.
The S&P 500 is set to open above its 50-day simple moving average for the first time since February, but it is technically extended and will confront key earnings Thursday night as well as a very important jobs report Friday morning.
The April jobs report is the first real post-tariff data to hit the market and will be much more timely than the GDP and PCE Inflation news that caused some initial concern on Wednesday. Those reports were distorted by activity to front-run tariffs, but this jobs number will illustrate the actual economic impact of tariffs.
Investors are almost giddy on Thursday morning after the Microsoft report and there is continued optimism that tariff and trade deals are underway. There also appear to be some breakthroughs in talks with China as both sides posture over who is more anxious to start negotiations.
My game plan is to play defense here and lock in some nice-sized gains. I want to focus on keeping my accounts near highs and raising a little cash. After a seven-day rally, there aren’t a lot of great entry points, and I don’t want to chase euphoria.
There are still a huge number of economic hurdles out there, and the likelihood is that one of them will trip up this uptrend fairly soon.
At the time of publication, Rev Shark had no positions in any securities mentioned.
