What Tariffs Are Really Doing
You’ve heard the numbers. 10% base tariffs. 145% on Chinese goods. 25% on cars, steel, aluminum, and a growing chunk of Canadian and Mexican imports. The average U.S. tariff rate is now around 20% — the highest since WWII.
The impact? Higher input costs, inflation pressure, and squeezed margins.
But markets aren’t reacting in a straight line. They’re rotating.
The Quiet Rotation: What’s Up While the Market’s Down
While major indices softened, these stocks moved higher — and not by a little.
- Finance: UnitedHealth Group (+15.9), Cigna (+7.28), MarketAxess (+7.13), and Progressive (+3.07) are getting attention. Safe cash flow and pricing power are in demand.
- Retail-Wholesale: AutoZone (+40.1), O’Reilly (+24.9), and PriceSmart (+5.97) rode strength in auto parts and bulk retail. These moves may hint at consumer adjustments to higher prices.
- Medical: McKesson (+7.57), Cencora (+5.26), Humana (+4.72) — all up while the broader healthcare index treaded water. When volatility rises, healthcare gets love.
- Consumer Staples: Coca-Cola Consolidated (+20.8), WD-40 (+3.86), and BJ’s Wholesale (+4.2) rallied as investors moved toward the predictable.
- Utilities: Classic defensive plays like American Water Works (+4.15) and Consolidated Edison (+2.53) found new buyers.
This isn’t random. These moves reflect a market preparing for lower forward guidance, weaker margins, and prolonged uncertainty. It’s not about running to growth — it’s about hiding out in quality.
Put Call Ratios Showing Potential Sector Rotation
I looked at yesterday’s Put/Call ratio and compared it to the 5-day Put/Call ratio for each of the S&P 500 sectors.
Utilities, Healthcare, and the Communication sector each had a lower one-day P/C ratio than their five-day average. Despite the slow market growth, these three sectors could hold up better than others. I was more surprised to see the Communication sector on this list, so I looked deeper to see what was happening.
The sector saw increased volume and is trying to find a bottom.
Not only that, but historically it has found a bottom when the implied volatility crosses above 32. The exception is, of course, this past week.
If we dig deeper, these are the sector stocks with a P/C ratio less than their 5-day average (highlighted in green).
A P/C ratio of less than 1.0 suggests bullish sentiment. While some of the stocks on the list have a PCR greater than 1.0, I’m looking at those improving compared to a 5-day average.
Earnings Season: All Eyes on Guidance
Friday starts the Q1 earnings parade, and it’s not expected to be pretty. The S&P 500 is now forecast to grow earnings +6.7% year-over-year — down from +11.1% just a few months ago. Full-year projections are also slipping, with +9.4% profit growth expected for 2025, down from +12.5% in January.
And that’s before companies factor in sticky inflation, slowing demand, and rising costs from tariffs.
Investors aren’t just listening to what companies earned. They want to hear what they see coming — and how much margin they’re willing to give up to keep business flowing.
What Traders Should Watch Now
- Guidance language: Does it suggest a margin squeeze or pricing power?
- Leadership shift: Do staples and healthcare keep leading, or does growth come back?
- Rotation or Reversal: Today’s outperformers could be tomorrow’s leaders — or a short-lived flight to safety.
The Bottom Line
Tariffs might be the headline, but the market’s story is elsewhere. Earnings season is about to put this quiet rotation to the test. The stocks that just held up best? They might be your best tells for what’s coming next.
That’s it for me this week! I will be back next week, and we will see what the markets have in mind for us to contend with.
