It was one of those days. The market came out of the gate with gusto yesterday, led by better-than-expected earnings results and major companies offering future guidance. This has been a sticky issue for the market and a reason to be bearish.

Call it a relief rally, but dismissing the level of advancers is hard.

Same Tide Lifts All Ships

Even skeptics must admire how balanced the move was. All eleven sectors traded higher and within the same range of gains.

There is no doubt that buy lists include all sectors, depending on the risk tolerance of potential buyers.

98% of the S&P 500 (SPX) finished higher.

There are more stagflation trends in manufacturing surveys. The Philly Fed Survey was a disaster. I hope Powell & Co. don’t hide behind this when it's time to cut rates ahead of a preponderance of hard data.

Bessent Brings Calm

A series of headlines from Scott Bessent gave the rally an extra oomph:

U.S. TREASURY SECRETARY BESSENT SAYS CHINA NEGOTIATIONS WILL BE A 'SLOG', DESCRIBES CURRENT BILATERAL TRADE SITUATION AS AN EMBARGO -PERSON WHO HEARD JP MORGAN SESSION - Reuters

BESSENT: GOAL IS NOT TO DECOUPLE U.S., CHINA ECONOMIES -JP MORGAN SESSION - Reuters -

BESSENT: U.S. SEEKS REBALANCING WITH CHINA BUT QUESTION IS WHETHER BEIJING IS READY TO DO IT -JP MORGAN SESSION - Reuters

BESSENT: REBALANCING OF CHINA ECONOMY TOWARDS CONSUMPTION ND U.S. ECONOMY TOWARDS MANUFACTURING IN TWO TO THREE YEARS WOULD BE A 'HUGE WIN' -JP MORGAN SESSION - Reuters

China has long dreamed of a more consumption-oriented economy, so there is an incentive to make concessions beyond the range of a prolonged trade war.

Note: Bessent is speaking today at 10:00 a.m.

Priced In?

Markets and stocks change hands based on future assumptions ranging from euphoric to disastrous. When extreme circumstances seem to be reflected in current share prices, the market and individual stocks are said to be “priced in.”

The goal is to temper greed levels on the way up and resist selling at or near low points. In other words, these methods help fight against human nature.

Although it falls under the category of “when I see it know it,” there are several scientific ways to determine and measure whether a future (usually six to twelve months) best or worst-case scenario is baked into current prices. 

Many professional fund managers incorporate Discounted Cash Flow (DCF) methods, but even that has various options.

Others incorporate key valuation metrics:

• Debt to Equity [D/E]
• Earnings Per Share [EPS]
• Earnings Before Interest, Taxes, Depreciation, and Amortization [EBITDA]
• Return on Equity [ROE]
• Price to Earnings [P/E]
• Price to Sales [P/S]
• Price to Book [P/B]

Still, others rely on chart patterns and positioning (technical analysis).

Tesla to the Rescue?

Tesla's (TSLA) financial results were simply disastrous. But everyone knew they would be (except the folks who offer earnings estimates), so nobody was shocked. The conference call went well; the company is on track with its Optimus and Robotaxis, and Musk will ease away from his role at the Department of Government Efficiency (DOGE). The stock surged in after-hours trading.

This brings me to the broader stock market, which has seen a nosedive that perfectly mirrors lowered earnings expectations. But what if those revised estimates are too pessimistic? That would mean the worst-case scenario is priced into the market, and it might be unwise to take losses.

Today’s Session

Yesterday investors were told the financial release from Boeing (BA) would be a disaster.  Pointing to the company being targeted by China, in retaliation for the United States having the temerity to fight back against mind boggling trade barriers against US businesses.

Boeing posted results that were much better than expected. I heard one media person suggested Boeing hasn’t factored in tariffs since the end of the quarter, on March 31^st. Management noted that tariff impact so far is limited, but it remains a key risk. 

Of course, it should be noted that President Xi’s plane is a Boeing 747.

Keep an eye on the ten-year bond yield, which is now below 4.30%.

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