The S&P 500 (SPX) still edged higher by 0.6% on Tuesday, and the bears are furious.

Make no mistake, there is still a lot of anxiety in the air, but beneath the surface, hope is bubbling up.

Broadening Rally

The best part of this move is participation and leadership. 

Yesterday, it was Financials (XLF), Materials (XLB), and Consumer Staples (XLP).

Individual leadership was also selective, with most positions tied to earnings and guidance. On Monday afternoon, Cadence Design Systems (CDNS) was among the first to post its results, and the management stated that tariffs were not an issue. 

Same Tide, but Lead Ship Momo

Low volume edged out momentum, but make no mistake, momentum has its mojo back.

Momentum (MTUM) is above its 50 and 200-day moving averages and gaining momentum (no pun intended).

Considering all the front-loading on trade, this morning's Gross Domestic Product (GDP) number will be interesting. The U.S. trade deficit in goods surged to a record high in March.

The first quarter of 2025 (1Q25) GDP will be a nail biter. Goldman Sachs (GS) is looking for a negative number.

The Heart of the Order

Earnings season kicks off after the close as the heart of the batting order comes to the plate.  Interestingly, beats are below average, and misses are below average.

Today’s Session

Lots of economic data out this morning along with a ton of earnings reports.

Real GDP for the first quarter is now in the books (with a revision pending), it came in below consensus (I often question the accuracy of consensus when outcomes seem so obvious). However, there are several caveats and a couple of asterisks.

The biggest caveat is the rush to beat tariffs, which is going to beat imports dramatically. Investments were firm and a lot of that was also-tariff-related.

Consumer spending held up, nicely.

And finally, government spending was reeled in.

Consumer prices climbed higher than expected, which will fuel the stagflation debate.

As for the asterisks - the biggest is import, which knocked almost 5.0% off the GDP report. That is the largest negative impact on record.

I must admit, I’m puzzled at the harsh reaction to the report considering the circumstances. I wonder if the ADP report is playing a bigger role than normal?

ADP Jobs Report

“Unease is the word of the day. Employers are trying to reconcile policy and consumer uncertainty with a run of mostly positive economic data. It can be difficult to make hiring decisions in such an environment.”

- Nela Richardson, Chief Economist, ADP

The ADP Payroll report for April came in at 62,000 against Wall Street consensus of 147,000.

Very small businesses outperformed.

Change in industry was solid green across goods producing jobs, which belies the notion of major impact from tariffs.

Keep an eye on the Ten Year Tresury Yield (TNX), which has made an encouraging retreat to under 4.20%.

The initial reaction is excessive, but could trigger additional selling.  

Now we wait for PCE. 

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