00:00 Speaker A
US stock futures pushing higher this morning after closing mixed in Monday’s trading session, following several volatile days that wiped out $10 trillion from global equities. So how long can the calm, if we can call it that, last? Joining us now with more we’ve got Yahoo Finance markets reporter, Josh Shafer. Some people would say calm, some people would say dead cat bounce, Josh. What is the street saying?
00:18 Josh Shafer
All right Brad, well we were here yesterday morning and futures were down almost 4% and then we end up closing flat, right? So I guess we probably in this market shouldn’t overreact too much to where futures are versus sort of where we’re headed, right? But I think what you’re seeing right now in markets overall is perhaps just a little bit of calm, as you said, that there might be some negotiations on the table for some of these tariffs. There’s been a little bit of reporting about that across different outlets. So I think you’re starting to see that come together. I think also the interesting thing that we’re seeing in markets over the last 24 hours is there is a deeper discussion about escalations with China in terms of the trade war, and you haven’t seen the market react too far to the downside on that. You had seen the market react significantly to the downside, of course, on all of the other tariff escalation headlines. So I thought that was sort of an interesting point. Piper Sandler’s Michael Kantrowitz said maybe there’s a read through there to sort of how the market views maybe China, the US China relations and sort of that trade negotiation has maybe a little bit of a different story than how we’re going to view US negotiations with essentially maybe every other country at that point.
00:59 Speaker A
It made me wonder, and I was so glad you flagged that commentary from Kantrowitz, that combined with the Goldman call that we may be heading into a broader bear market, made me wonder, does this market see a focus on China when it comes to tariffs as a positive? Like, if we’re just focused on what could be as high as a hundred percent tariffs on China, which is obviously going to really rock a lot of consumer facing names, is that still a positive for this market?
01:16 Josh Shafer
You could argue maybe it is, right, Maddie, because then you can start to get on a company specific basis, well, what companies were most exposed to China, what companies does that actually affect? Right now you’ve been in a mood where essentially correlations went to one, right? That’s what we’ve been talking about over this sell-off. Essentially, you’ve just seen the market sell off on broad growth fears and sort of what Goldman was getting at in their note talking about this being maybe a event-driven bear market that could happen. Remember, we’re very close to bear market levels right now. But the fear of being a cyclical bear market, that would normally come with a recession and that would probably come with the widespread tariffs that we’ve talked about. If we get a widespread of tariffs, you maybe get the slowdown that economists have feared, you get the recession, and that’s not something that you come out of with sort of a V-shaped recovery, right? If we’re going into a broader economic slowdown, that’s not the COVID trade where all of a sudden the government comes in, everyone helps, there’s money everywhere, the Fed cuts rates to zero and bang, you’re back. That’s not the kind of slowdown that we’re talking about here. So that’s how Goldman sort of gets to that cyclical bear market fear, not necessarily their call right now, but pointing out that’s certainly a risk and something I think you’ve seen the market try to maybe price in over the last couple days.
02:23 Speaker A
And so with that, it seems like most of the major firms have already downgraded some of their own expectations, but now comes the real test, which is earnings season this week as well.
02:33 Josh Shafer
Yeah, Brad, and I thought Keith Lerner from Truist made a great point about earnings season yesterday. He said, we know the guidance and the commentary probably isn’t going to be great for a lot of these companies, right? I think at this point you can expect that, that’s perhaps probably baked in. The question is, how do stocks react to it? And that gives you a sense of where the market’s at with a lot of these companies on a sector specific basis. For instance, if a company cuts its guidance, but the stock doesn’t go down 10, 15% like it would in a normal quarter when people aren’t expecting that, maybe you can sort of argue part of that is already priced in, right? So I think you’re going to get a sense of where the market is at on a sector by sector basis with companies as we get into earnings season. Of course, we’ll kick off with financials on Friday and some key big banks to hear from.
03:07 Speaker A
And it’s going to be interesting to see if there is a rewarding happening from the street for some of these earlier companies reporting if they don’t offer guidance, which is what seems to happen with a company like Levi’s rocketing up today, even though they didn’t even take tariffs into their guidance. So, I think that’ll be very interesting to monitor, Josh. Thank you so much, appreciate it.
03:24 Josh Shafer
Yeah.