April 25, 2025

The latest market rally kept going strongly for the third straight session yesterday as better-than-expected profits for U.S. companies piled up, though C.E.O’s said that they are unsure whether it will last because of uncertainty created by President Trump’s trade war.

The Dow gained 486 to 40,093 and the only negative stocks among this group were the consumer staples that were the ones that people ran into on days when the technology and others sold off, such as KO, JNJ, PG and UNH.

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The S&P did even better with a 109 upside moonshot to 5485 on strength once again in most large cap technology issues plus the financials. It has now improved to being only 11% below its high after touching as low as 20% recently, so this is a nice improvement .

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The Nasdaq gained 458 on some strong technology earnings results to 17,144 while the Russell 2000 Index of small stocks did well again with a 38 point advance to 1957.

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And the VIX continued to decline, now down to 26.47 after reaching as high as 60 on the recent market lows.

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Tech stocks helped lead the way, including NOW after the AI platform company delivered a stronger profit for the start of 2025 than analysts expected. The company, whose AI agents help clients manage their customers, saw its stock jump 15% after it also gave a forecasted range for upcoming subscription revenue that beat some analysts’ expectations.

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Adding to the gains in this area were good reports from TXN, LRCX, WHR and ON.

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Of all things, LUV reported stronger results than expected for the first three months of the year. But its stock flipped between gains and losses through the morning after it also became the latest U.S. carrier to say the outlook for the economy looks so cloudy that it is pulling some of its financial forecasts for the year. Its C.E.O said the company is “controlling what we can control,” and it is cutting how much flying it will do in the second half of the year. For its troubles, the stock pulled higher in the afternoon.

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Rival AAL pulled its financial forecasts for the full year and said it plans to provide an update when “the economic outlook becomes clearer.” Its stock also turned an early loss into a late gain after it also topped profit expectations for the latest quarter.

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Companies across industries have been talking about how difficult it is to give financial forecasts for the upcoming year, as Wall Street typically expects them to do, because of the on-again-off-again rollout of Trump’s tariffs.

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U.S. stocks had rallied the prior two days on hopes that Trump was softening his approach on tariffs and his criticism of the Federal Reserve. These approaches had earlier shaken markets. But China, the world’s second-largest economy, on Thursday denied it is involved in active negotiations with the United States over tariffs, saying that any suggestion of progress was as groundless as “trying to catch the wind.”

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Calling Trump’s policy announcements “headline turbulence,” the Asia & Oceania Treasury Department at Mizuho Bank warned that global economies could be hurt in the long run, adding: “Sentiments swing from hopes of intense relief to inflicted economic gloom.”

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Trump has delighted global investors with the possibility of a reduction in tariffs on Chinese imports. But his apparent willingness to de-escalate America’s trade war with the world’s second-biggest economy has been brushed off by government officials in China and ridiculed online as “chickening out.”

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On Tuesday, Trump said that tariffs on Chinese goods will “come down substantially.” He even promised to eschew hardball tactics, vowing to be “very nice” at the negotiating table and pledged not to mention the origins of the Covid-19 pandemic.

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But Beijing has remained unmoved by the overtures. Instead, it has demanded Trump remove all tariffs on China.

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“As the saying goes, ‘He who tied the bell must untie it,’”  a spokesperson for China’s Commerce Ministry, told reporters Thursday.

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“The unilateral tariff hikes were initiated by the US. If the US truly wants to resolve the issue, it should heed the rational voices of the international community and its own domestic stakeholders, fully remove all unilateral tariff measures against China, and find a way to resolve differences through equal dialogue,” he added.

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Chinese officials also denied the two sides are speaking. Trump told reporters on Wednesday there were direct talks between US and Chinese officials “everyday” on trade, though he didn’t offer specifics.

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A spokesperson for China’s Foreign Ministry, said on Thursday when asked about the talks. “To my knowledge, China and the United States have not engaged in any consultations or negotiations on the tariff issue, let alone reached any agreement.”

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Chinese experts who advise the government see Trump’s rhetorical climbdown as caving in to US domestic pressure and an attempt to placate the markets. They believe Beijing has the upper hand and is in no rush to make a deal with Trump.

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After weeks of posturing and contradictory messages, Chinese officials mistrust Trump. “The pressure (on Trump) at home is mounting, and much of his current messaging is aimed at appeasing domestic concerns.” “He’s getting a bit flustered now. But China doesn’t buy into his talk about (substantially lowering) tariffs. He says one thing today and another tomorrow, maybe increasing them again the next day.”

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However, the Chinese economy isn’t the juggernaut it once was, and some experts say Beijing will eventually have to negotiate.

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Trump’s abrupt tone change on China came a day after he met privately with chief executives of four major US retail companies — WMT, TGT, HD and LOW who expressed concern about rising economic fallout from his tariff policy and the uncertainty it has created for financial markets.

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Many major investment banks have predicted the massive tariffs, as well as China’s 125% retaliatory tariffs on US goods, would plunge the US and global economies into a recession.

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And while the president hasn’t quantified what he means by a substantial tariff cut, a senior White House official said that the current 145% tariffs on China could come down to “between roughly 50% and 65%.”

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But Renmin University’s Wang, who is currently traveling in Washington and speaking to American analysts, said slashing tariffs to that level is not enough to get China to negotiate.

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“If you really want to negotiate seriously with China, then you should cancel all those baseless tariffs first, and then come back to the table,” he said, adding that Trump is trying to “bait” Beijing into talks.

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In the meantime, many U.S. companies are continuing to report stronger profit than analysts expected for the start of 2025, while offering caution and uncertainty about the year ahead.

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Toy company HAS jumped 15% after reporting better profit and revenue for the latest quarter than analysts expected. It cited strong growth for its Magic: The Gathering game, among other products.

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These gains helped offset a drop for Dow component PG, which fell even though the company behind Olay, Tide and Pampers reported stronger results for the latest quarter than expected. Its revenue was below expectations, and it also cut its forecast for profit growth this fiscal year.

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It said that it is expecting a $200 million hit to its earnings this fiscal year because of higher costs for commodities. The C.E.O. said his company expects “more volatility and uncertainty” and that “consumer conditions in many markets remain subdued and similarly have an uncertain outlook.”

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His company’s stock fell 5% after the beverage and snack maker cuts its forecast for an underlying measure of profit over 2025, citing increased costs from tariffs and subdued conditions for customers. A 25% tariff on imported aluminum for cans is among those hitting PEP and other beverage makers.

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In the bond market, Treasury yields continued to ease following their disconcerting run higher earlier this month. Yields usually fall when fear is dominating markets, but their surprising earlier rise stirred fears that Trump’s trade war was degrading the U.S. bond market’s status as one of the world’s safest places to keep cash.

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The yield on the 10-year Treasury fell to 4.30% from 4.40% late Wednesday, in part on expectations that the Federal Reserve could cut interest rates later this year to soften the economic blow that may come from tariffs.

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Yields sank after a report showed that weekly jobless claims rose to 222,000, more than expected. A separate report said sales of previously occupied homes weakened by more than expected in  March, 5.9% which was the lowest since 2009.

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This week will see the following earnings releases: yesterday –  Dow components IBM, MRK and PG lower in addition to CMG, CMCSA, VLO, XEL, PEP while TXN, LRCX, WHR, NOW, BMY are higher; today – GOOG, ABBV higher and INTC, GILD and TMUS are lower.

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Economic reports will show: yesterday -  weekly jobless claims came in at 222K, March durable goods orders rose by 9.2% but ex-transportation were unchanged, March existing home sales fell by 5.9% which was the lowest since 2009; today – final March U. of Michigan Consumer Sentiment Survey improved a bit at 52.2 and the inflation expectation eased back a bit to 6.5%.