S&P 500 earnings per share estimates problem monster

The market has a problem (CSA Archiva/Getty Images)

The “most important variable” for a rally that sticks

“It will take more than just an oversold market to get more than a tradable rally,” wrote Mike Wilson, a top equity watcher at Morgan Stanley.

Matt Phillips

3/18/25 6:00AM

Why did the market’s “momo” seem to suddenly evaporate in February? What caused it? Angst over AI profitability? The never-ending story of President Trump’s tariff announcements? Concern over the collapse of the transatlantic alliance? Stubborn inflation?

In markets, as with improv comedy, the answer must be, “Yes, and.”

But more importantly, how will we know if stocks are ready to get out of this ditch? After all, on Friday, the S&P 500 enjoyed its biggest jump of the year, with a 2.1% increase. With Monday’s 0.64% increase, the blue-chip index has had its best two-day gain, 2.8%, since Trump triumphed last November. Is this rally for real?

Morgan Stanley stock watcher Mike Wilson was out with a note over the weekend giving his two cents on whether the upturn could mark an end to the whipsaw trading that bedeviled traders over the last month: “The short answer is, probably not,” he wrote. He continued:

“In my view, it will take more than just an oversold market to get more than a tradable rally. We firmly believe that earnings revisions is the most important variable, and while we could see some seasonal strength/stabilization in revisions, we believe it will take a few quarters for this factor to resume a positive uptrend.”

As you can see from the chart above, the drop in S&P 500 earnings per share estimates for 2025 has stabilized in recent weeks. An important driver of that decline in expectations, simply because of their massive market capitalizations, has been a drop in profit expectations for a few giant tech firms including Apple, Microsoft, and Tesla.

Signs of stabilization in earnings expectations for these companies is key for getting overall revisions to start to turn up, supporting an ongoing rally. But so far, only Microsoft has shown signs of life after reporting its results in late January.

Matt Phillips

Intel jumps on report of joint venture with TSMC

Intel surged on a report from The Information that it’s reached a preliminary deal to form a joint venture with Taiwan Semiconductor to operate Intel’s chip-making operations.

TSMC would take a 20% stake in the venture, The Information reported, citing two unnamed people “involved in some of the discussions.”

Rumors of such a matchup have been in the market for a few weeks, but were batted down. The Information notes that its sources say deliberations are ongoing and still aren’t final. The market sure likes the sound of it, though.

Intel, TSMC Tentatively Agree to Form Chipmaking Joint Venture

The tanking US dollar screams that tariffs are America’s Brexit moment

TL;DR: Tariffs this massive will hurt us more than them.

Matt Phillips, Luke Kawa1h

Luke Kawa

$22 billion in selling from leveraged ETFs the next shoe to drop for megacap tech stocks

As we await further twists and turns in the tariff saga that’s rocked global markets, the damage that’s already been done promises to cause even more damage.

JPMorgan analyst Bram Kaplan noted that because of today’s rout, ETFs that use leverage to juice their returns are going to be big sellers as we approach the end of the day.

“Levered ETFs need to sell ~$5 billion per 1% market move to rebalance. As such, we estimate these funds have ~$22 billion of equity exposure to sell into the close today, ~75% of which is in tech-related exposures (e.g. NDX, the broad Tech sector, and Semiconductors), based on market levels at mid-day,” he wrote.

Using an expansive definition of “midday,” major indexes are flat to down since Kaplan’s calculations.

Many of the popular ETFs that utilize leverage track major indexes, like SPDR S&P 500 Trust and Invesco QQQ Trust, but some are tied to stocks like Nvidia, Tesla, industry groups like chip stocks, or the tech sector as a whole.

Millie Giles

European luxury stocks fall out of fashion after tariffs, with luxury watch retailer hit particularly hard

As the President Trump’s 20% blanket tariff on all imports from the European Union into the US wreaks havoc on the stock market, one industry that’s fast becoming passé for investors is Europe’s luxury sector.

Indeed, Europe is the epicenter of the world’s luxury brands, accounting for ~70% of the global luxury goods market, per EU estimates, and the region’s high-end exports are valued at some €260 billion (~$287 billion) annually.

Following the announcement, luxury stocks across Europe dropped, with Louis Vuitton parent company LVMH, Gucci owner Kering, London-listed Burberry, and Italy’s Moncler all slipping on the news.

But it’s the smaller UK-based Watches of Switzerland that’s getting hit hardest in the space, with its stock down more than 13% in London trading. Since its core business focuses on shipping luxury watch brands like Rolex, Patek Philippe, Cartier, and others around the world — with 45% of its sales last year coming from the US — the high-end retailer appears particularly exposed to rising tariffs.

As outlined by Fortune, one reason for Trump’s tariffs is to encourage investment in US manufacturing to avoid import fees — but the European luxury sector often bases its brand culture on local craftsmanship, making moving production stateside unlikely for many fashion houses and jewellers.

Europe’s luxury players face a path-defining twist with Trump’s tariffs. But only a handful of them will suffer the worst impact

Nia Warfield

Shares of Coca-Cola hit all-time high as investors seek safety in ubiquity

Traders turn to soft drink sellers Coca-Cola and Pepsi to navigate a hard market.