In recent weeks worries about a trade war with China have caused the market some problems. Rallies have fizzled out and technical levels have been barely holding. The indices haven't succumbed but they have been under steady pressure.
With tariffs having been placed on Chinese goods effective at 12.01 a.m. ET Friday, there seemed to be little reason for the market to celebrate. China has already reciprocated with tariffs on hundreds of U.S. goods and President Trump is already talking about ramping up the pressure.
Instead of the doom-and-gloom scenario that the bears felt was a certainty, stocks ramped up all day until a little profit-taking hit at the close.
This was classic "climb the wall of worry" action. Many are fearful that some bad news is going to take hold and drive the market down, but when it doesn't the buyers keep inching in and the market climbs steadily higher. It is the cash on the sidelines that is the driving force?
It also didn't hurt this morning that the jobs report for June was solid. Not only was there a slight upside to the payroll numbers but there were over 600,000 people returning to the workforce. That caused an uptick in the unemployment rate, but it clearly is an illustration of increased economic optimism.
While the trade news may be a negative as far as economic growth, it also contributes to keeping inflation in check. The lack of wage pressures in the jobs report will help keep the Fed on the dovish side as well.
While the trade wars are grabbing the headlines there is a steady flow of positive economic news. Employment is solid, wages are up 2.7%, retails sales are at all-time highs, housing starts are at a 10-year high, debt delinquencies are low and inflation is still not over the key 2% level.
The trade war may be a drag on growth but there are a slew of positives to offset it and the market seemed to recognize that fact as it climbed to a nice gain.