Bessent Elevates Concern for Mixed Market

As we move into a wider array of companies reporting their June quarter results and updating their outlook for the back half of the year, the market is mixed on Tuesday morning after the S&P 500 set its 10th record close on Monday night.

And for those keeping score, the Nasdaq Composite put in its 12th record close last night. We talked with you about the important role corporate guidance would play in the market’s next move, and we are starting to see that “beat and reiterate” June quarter results are getting treated as if a company were guiding lower. We saw that with our own American Express AXP shares, which are down following last week’s earnings report, and we’re seeing that again on Tuesday morning with shares of NXP Semiconductor NXPI. NXP bested consensus EPS for its June quarter by a few pennies and maintained its 2025 EPS guidance.

We’ve shared our view that 2H 2025 EPS expectations for the S&P 500 and individual companies will be a critical factor for the market over the next few weeks because of the market’s ascent over the last few weeks. While folks, including ourselves, have enjoyed that collective move, the combination of another record close for the S&P 500 and both that index as well as the Nasdaq Composite were at or very near overbought relative strength index (RSI) levels coming into Tuesday's trading raises that bar considerably. Given tariff and trade deal uncertainty, we expected companies would skew their guidance to the conservative side, which is why we’ve kept the Portfolio’s cash level elevated.

Near term, as the market grapples with earnings and updated guidance, we’re likely to see volatility once again return. As that happens, we’ll march toward President Trump’s self-imposed August 1 trade deal deadline. Trump has already indicated there will be no extensions this time around, something we suspect is tied to his wanting to quash the "Trump Always Chickens Out" (TACO) label he’s been hit with.

That is prompting questions as to how countries will respond should trade deals not be inked and Trump tariffs be back in effect at elevated levels. The European Union is reportedly considering its “Anti-Coercion Instrument,” which could lead the EU to restrict U.S. suppliers’ access to the EU market, excluding them from participation in public tenders in the bloc, as well as putting export and import restrictions on goods and services, and limits on foreign direct investment in the region.

On Monday, U.S. Treasury Secretary Scott Bessent said the Trump administration is more concerned with the quality of trade deals than their timing. On Tuesday, he indicated we should see a flurry of deals in the next few days, but also signaled trade talks with China will likely get extended past their August 12 deadline. Our concern remains that trade deals that get announced near-term will be ones with more modest trading partners, not key ones like with Mexico, Canada, the European Union and China.

As we contemplate that potential impact, Tuesday morning’s June quarter report from General Motors GM offers a sobering reminder of what the market could experience in the next few weeks. GM’s June quarter core profit fell 32% to $3 billion, as the automaker continued to confront challenging tariff policies, which it said sapped $1.1 billion from the results. And that’s before any post-August 1 incremental tariffs.

As you can imagine, the above is keeping us in defensive mode, and that means proceeding carefully as the market is poised to once again trade day by day based on the latest headlines.

On the brighter side, we are seeing multiple price target increases for our holdings this morning:

Scotiabank upped its Amazon AMZN target to $275 from $250 and lifted its Meta META target to $675 from $525.

Needham increased its AMZN target to $265 from $220, citing record-breaking Prime days. Meanwhile, BMO Capital sees greater efficiency gains being unlocked due to AI, spurring a target increase to $270 from $233. Citi increased its AMZN target to $265 from $225 as well.

Citi also upped its Microsoft MSFT target to $265 from $225.

Alphabet GOOGL shares received a higher target of $218 at Stifel, up from $200, given expectations for better-than-expected digital ad performance.

More Pro Portfolio

At the time of publication, TheStreet Pro Portfolio was long AXP, AMZN, META, MSFT and GOOGL.