Why does the darned thing go down? Why does the market rally on President Trump's 10% tariffs on $200 billion in Chinese goods with the immediate retaliation by the Chinese on $60 billion of our goods?
Are we all whistling past the graveyard or is there something else afoot that makes it so that you consider this move rational?
First, the number is only 10%. Many thought that 25% was in the cards. You'll get 25%, which would be truly the death knell of a ton of business with China come January, if there is no deal. So the disaster did not occur.
Second, amazingly, there's a ton of talk that the Chinese are going to launch a stimulus program to goose what seems to be a flagging economy. Both their stock market, which took a break from going down, and our stocks that are levered to Chinese infrastructure, stocks like Caterpillar (CAT) with earth movers and United Technologies (UTX) with Otis elevators, roared. A rising stimulus is thought to lift all boats including the American ones. We do have a pretty bizarre situation where the companies that many of us feel could be the most hurt from the trade war are the ones that would be most helped by stimulus. On days like today, suffice it to say that this is a glass not half full but totally full.
Third, as much as FANG was pronounced dead yesterday, we are now seeing good news from Amazon (AMZN) about new Alexa products, we are seeing Netflix (NFLX) winning a ton of Emmy's and we are seeing Alphabet (GOOGL) get involved with autonomous vehicles.
Fourth, there's corporate news galore: Union Pacific (UNP) is rationalizing its network. Oracle (ORCL) reported a quarter that looked light but the analysts took it higher anyway. Apple (AAPL) got a break from the president on some of its accessories that it makes in China that it exports here.
That's a ton of good news for one day and it explains a ton how you can rally on a day you would expect to be down.
(Amazon, Alphabet and Apple are holdings in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells AMZN, GOOGL or AAPL? Learn more now.)
