The problem with a 1% up day, like Monday, is that anything like a less than 1% day, or even a flat day, is regarded as a sign that the previous day's move was move was phony.
I think the truth is anything but. We had a move Monday of incredible proportions in the banks, transports and the industrials and they are signs of a false estimation of growth being debunked.
That kind of move doesn't go away in a day, and it is not controlled by anything in this country. It's entirely controlled by China.
Yes, Monday's move was driven by the Chinese PMI and, until then, it wasn't clear exactly how much the long-side bulls really cared about Chinese growth -- or lack of it.
When you look at the industrials that moved up, you see all of the ones that have a majority of their growth from China rallying hardest.
When you see which transports are going higher, you see that the most levered to China were the stars of the show.
It's harder to explain the linkage with the banks, but it seems to me that those with international growth businesses did the best.
Now it is true that the techs did well, too, but I have to think that's because, with the exception of the cloud stocks that went higher, we are seeing a belief that China might be buying more tech, too, hence the surge in Xilinx (XLNX) and Cisco Systems (CSCO) , now regarded as geared to Chinese 5G growth.
Frankly, it is a little silly that one number -- ONE NUMBER -- a Chinese PMI going higher, showing expansion, can trigger this kind of buying, especially with no new news about trade between the two governments.
But what else can explain, say, the moves in Federal Express (FDX) and Union Pacific (UNP) , both with sizable businesses connected with China. If you go back over the Fedex quarter, you will recall that CEO Fred Smith talked about weakness in both Europe and China. The latter is a PMI call. Union Pacific relies on a lot of cross country deliveries from Chinese ports. Again, it's about the PRC.
Oh, and let's not forget one more: Apple (AAPL) . The stock of Apple was up almost two bucks before the market opened and then wilted on the 6% price cut that went around the world. But there was no six percent price cut. The Chinese cut the VAT tax on phones and that led to lower prices. If anything you should have been buying Apple on Chinese strength and lower taxes, not selling it on non-existent discounts.
Anyway, yesterday we learned a valuable lesson. The portfolio managers out there care more about Chinese expansion than they do Chinese talks. The fact that China put up a good PMI was enough to convince these PM's that perhaps bonds were wrong, perhaps there will not be a worldwide recession led by China, so let's party on like it was before President Trump put on his tariffs.
Of course, there is only one problem. Most of these companies will talk about a downtick in Chinese business when they report.