The string of news coming out this week was unequivocally positive, supporting (and extending) the market recovery that we have seen since the bottom on Apr-9, according to Goldman Sachs' Chris Hussey:
1. Trade. The White House continued to unilaterally pull back on its tariff policies, introducing a partial exemption for US Auto makers that use imported auto parts.
2. Data. Today's April Payrolls report revealed a resilient labor market with non-farm payrolls rising 177k alongside an unchanged unemployment rate of 4.2% . And on Thursday, the ISM Manufacturing Index declined only marginally from a month earlier to 48.7. The combination drove our economists to push back the first Fed funds rate cut in our forecast to the July FOMC meeting (vs. June previously). But the divergence between 'soft' and 'hard' data continues to widen...
3. Earnings. So far, aggregate, year/year S&P 500 EPS growth is tracking above what was expected at the start of the earnings season (12% vs. 6%) primarily driven by positive margin surprises -- and the frequency of positive earnings surprises is modestly above historical averages.
4. AI investments. Concerns that 1Q25 would mark the beginning of the end of the AI investment boom have not materialized as MSFT and AMZN joined GOOGL from last week to provide an across-the-board picture from the hyperscalers that the need for more AI compute capacity has not abated.
And beyond the news, Goldman's Vicki Chang wrote in a note earlier this week that it is possible that we have already seen the peak of tariff-related shocks...
