Why Earnings Aren’t Moving the Market — But This Is

by | Feb 3, 2025

Earnings season is heating up, but it’s taking a back seat to something even more disruptive — tariffs.

Markets were on edge last week, with companies like Tesla (TSLA), Meta (META) and Microsoft (MSFT) reporting, but it wasn’t the earnings that stole the spotlight.

Instead, it was the renewed tariff announcements targeting Canada and Mexico that sent markets into a tailspin. Though, the White House announced this morning that it would suspend tariffs on Mexico to March 1 after an agreement was reached.

We saw some solid earnings reports last week with plenty more on deck, but the market reaction was muted at best. Why? Because traders aren’t just looking at the numbers — they’re factoring in the broader economic impact of these tariffs.

It’s not just about revenue and profit margins anymore. Tariffs bring uncertainty, and markets hate uncertainty. The result?

Even positive earnings couldn’t keep the indexes from retreating Friday into this morning.

And the Federal Reserve and inflation data felt like afterthoughts this week. The Personal Consumption Expenditures (PCE) numbers were a non-event, and the Fed’s comments barely made a dent. But when the tariff news hit, it was like flipping a switch.

The market sold off hard, with the S&P 500 (SPY) and the Nasdaq 100 (QQQ) pulling back from near all-time highs. The message was clear — earnings are important, but global trade tensions are the real market movers right now.

The volatility spike on Friday wasn’t just random noise. It was a direct reaction to geopolitical uncertainty. As tariffs loom, companies in sectors like Industrials (XLI) and Basic Materials (XLB) are particularly vulnerable.

We’re already seeing the ripple effects in these sectors, and it’s likely to continue if the trade tensions escalate.

So, what does this mean for traders?

It’s simple — stay nimble. Earnings reports will continue to come in, and many companies will post strong numbers. But don’t expect the market to reward them if tariffs are dominating the headlines.

Instead, focus on managing risk and looking for opportunities in the volatility. Strategies like bear call spreads and broken wing butterflies can be effective in this kind of environment, allowing you to profit even when the market is uncertain.

Looking ahead, the next few weeks will be critical.

Earnings season is far from over, and there are still major companies set to report including AMD (AMD), Google parent Alphabet (GOOG; GOOGL), Amazon (AMZN), just to name a few of the biggest.

But unless we see some resolution on the tariff front — like with Mexico this morning — expect the market to remain choppy.

The best approach is to trade what you see, not what you think should happen. Keep an eye on key support and resistance levels, and don’t be afraid to adjust your strategies as the market evolves.

In the end, earnings and tariffs are both part of the same equation. The challenge is figuring out which one the market cares about more at any given moment. Right now, tariffs are in the driver’s seat — but that could change in a heartbeat.

Stay flexible and stay alert, and you’ll be ready to capitalize on whatever’s thrown your way.

I’ll see you in the markets.

Chris Pulver

Chris Pulver Trading

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*This is for informational and educational purposes only. There is inherent risk in trading, so trade at your own risk. 

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