The Rally to Start All Rallies, or Something Else?
Records were broken following announcement of a 90-day pause in most tariffs. But has anything really changed?
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After 1:18 p.m. ET you could feel the energy starting to rise as the bulls came to work and pushed the markets ever so higher. It did not stop until the closing bell at 4 p.m., as nearly three hours of continuous buying moved markets anywhere from 9-12% by the end of the day.
Those exaggerated moves were eye-popping but not surprising. Why is that? Volatility was/is elevated. The VIX was ticking above 50% for most of the day after a large move the prior session, and it only took this sort of "news" to pull the VIX down. For its part, the VIX fell a record amount, more than 33% in one session.
Can the markets followthrough with a rally? So far Thursday morning the answer is no, as this powerful rally barely made it under the 20-day moving average, which is not a bullish sign.
The tough part to deal with here is trying to wrap our heads around what this really means. This is not a removal of tariff policy; rather, it's a 90-day "cooling off" period where it is quite possible tariffs could be removed before the time is up. But that brings us to July and with it so much uncertainty between now and then.
The nice thing (if you want to call it that) about Liberation Day on April 2 is that, whether we liked it or not the policy was defined and rolled out. Clearly over the last five sessions the stock market did not appreciate it but a rollback Wednesday was met with cheers rather than jeers.
Another question we must ask is this: Has anything really changed since then? In our minds the answer is no, and the bond market still reflects angst and higher rates than what is being priced in for a weaker economy. Further, there are stories and rumors about some big bond sellers, perhaps countries with large holdings, that are selling U.S. Treasuries. This will put pressure on bonds and push yields higher, where the problem for lawmakers is tenuous. Above 4.4% on the 10-Year Treasury is concerning as refinancing of debt becomes costlier.
Relating to TheStreet Pro Portfolio, LabCorp LH declared a 0.72 quarterly dividend, in line with previous distributions. Alphabet's GOOGL CEO reaffirmed the company's pledge to invest about $75 billion to build out data center infrastructure. Meanwhile, Taiwan Semiconductor TSM reported a huge surge in revenue in Q1, a 42% increase driven by strong AI server demand and smartphones ahead of looming U.S. tariffs.
Back to the data, March CPI is out this morning. It was expected to be up 0.3% m/m and 3% y/y on the core number, and up 2.5% y/y and 0.1% m/m on the headline. The actual numbers came in -0.1% on the headline and 2.4% y/y, while core numbers cooled down a bit too, with 2.8% y/y, which is still a bit hot but trending in the right direction, and less than previous month.
At the time of publication, TheStreet Pro Portfolio was long LH and GOOGL.
