Yahoo Finance

Well, stocks are on a tear this morning amid easing trade tensions with the S&P 500 set to erase all of its post-liberation day losses. While investors may be optimistic today, how bullish is Wall Street, some of the big money going forward? Here to break it down, we've got Yahoo Finances, Josh Shafer, Josh,

what have some of the reactions been from what you've gathered on the street this week?

Yeah, Brad. I mean, still early, right? So, we're still starting to get just a little bit of reaction, but I guess to cover really this morning's action and what you're seeing in futures right now, I was just speaking with Keith Warner. He's the Co-CIO over at Extrews, and what he was saying to me is just simply put you're seeing a better than expected style reaction in the market, right? I don't think the market was priced for the US and China to actually go have this meeting this weekend and have real news come out of it, and we did have real news come out of it. So, I think you're just seeing a clear reaction to that. Jared was pointing out earlier looking at the market, looking at what's up, what was a lot of the biggest things that were down, right? Sort of before we had this bounce. So, I don't think there's a lot of shocking there. Now, someone like Keith, who has been a little bit more on the bare side recently, said he feels like he still needs to see a few more key things perhaps happen, right? What happens over the next 90 days? What do we actually leave this 90-day pause period with? Then, also, when you think about the data, how does the economic data that has been disrupted from these tariffs over the past month actually play out? Similar story on earnings. What's a company like Walmart say later this week, right? How are they handling the back and forth here? Yes, obviously, a positive news for a company like that, positive news for a company like Amazon, but how do they actually put that then back into their models, and how does that make them feel? Sort of remains to be seen, but I think if you're thinking on a short-term basis, I'll cite another source here. We're looking at research coming out from City, Steward Kaiser. He's more of a trader type, right? He said this is a game changer because they had not been positive on a short-term trading basis overall on a lot of more risky areas of the market. He said, well, this opens that up. I'm now a little bit more positive and again calling it a game changer.

Yeah. And to double click into that, Josh, it's interesting Ben Emmons overnight with a note talking about how the leadership is potentially going to change as we come out of this sighting the move forward that we've seen in the Russell 2000 in particular this morning. But, I know you've talked about how typically when you're in a bear market territory, the things that got you down there tend to be the things that lift you back up. What are you hearing about what the leadership coming out of this moment might look like?

I think people have expected that something like the Russell would probably lead on the way back up at least on the start, right? That's sort of how this normally would work, right? A lot of the names that get crushed over the past month, over the past two months. I mean, if you look at a year-to-date of the Russell 2000, or even a two month of the Russell 2000, it was going down a lot, right? So, then, of course, it makes sense for it to pop back up. What's interesting when we think about an index like that, yes, it is more high beta, usually moves more than the market on a day-to-day basis, right? But, it also is a small cap index. Those are small cap companies. How are they going to be impacted by tariffs is very different than how a large cap company is going to be impacted by tariffs, and I think people have generally been a little bit more bearish on something like the small cap from the Russell 2000 from that perspective. So, does this really shift that story that much?

Again, I don't know, right? I think right now you're seeing a big one-day bounce, and then people want to hear more still, see more, and also, as your prior guest was just saying, the headlines aren't going to stop. We're going to do this for 90 more days now, and again, this is just one deal. I think people would like to see the US also make tariff deals with other countries as well.

Just lastly, but we have you here, Josh, and I know you geek out about some of the weekly FactSet data as much as I do.

Of course, I do.

I know you were in Nashville, Tennessee, not paying attention to it last week, but one of the things that they called out was for Q1 2025, 78% of S&P 500 companies reporting a positive EPS surprise. And then, ultimately here, the guidance, which is really coming to focus in the outlooks here, 41 of those companies issuing negative guidance, 34 of those companies issuing positive EPS guidance. So, all of those things considered,

Of course.

how are companies best positioning themselves for a period where they don't know if there's going to be a deal that either affects them positively or negatively, and how much of that still will pass on to consumers which we're going to hear from one of the biggest bellwethers of consumers, Walmart, as they report.

Yeah. I mean, I think broadly it seems like strategists have been saying that earning season is coming in a little bit better than people had hoped, right? Obviously, that's a typical theme, but I think even just generally speaking, the entire vibe and sentiment has been a little bit stronger than people hoped. You have seen estimates coming down though for the next couple quarters, which, of course, is also always a trend, but I think what's going to be interesting now is if you shaved about 4% off Q2 or Q3 earnings over the past month,

is that the trough, right? Are expectations now low enough again for earnings, for earnings growth? Company or strategists probably and analysts still expecting earnings growth for the S&P 500 for the rest of the year, but has that now come down enough that it can go back up? And so, if you can start to get EPS revisions coming back up instead of just the continuous trend down, then perhaps that starts to bring a little bit more fuel to this market rally, and you can start talking about something like the S&P 500 getting back above 6,000, and you start talking about a little bit more of a rally, right? That's what people are arguing. Mike Wilson still has 6,500 for the end of the year, and he feels like EPS revisions might have hit a bottom. Well, if those come back up, that's your support to really see a real rally in this market.

And potentially, even relief that it's not as bad as some of the company's reported, right?

Right. Low expectations at some point, right?

Yeah.