For stocks, the conversation is changing. The president has sent out his men with a clear message on China tariffs but without a timetable for talks and with a great deal that is negotiable.
President Donald Trump could blow this up again — his announcement Thursday night that he is exploring an additional $100 billion in tariffs on China has markets down again Friday morning — but for the moment investors are eager to move on.
The conversation will now move to the pace of economic growth. On Friday, we get wage growth statistics for March, and new Fed Chairman Jerome Powell will speak on the state of the economy.
The best-case scenario for stocks would seem to be wage growth in line with expectations (0.2 percent month-over-month, 2.7 annualized growth) and job growth in line with expectations of 178,000.
The worst case scenario is likely wage growth higher than expected (0.3 percent or higher month over month, 2.9 percent to 3 percent annual), with upward revisions from February, and job growth much higher, all of which would increase the chances for a Fed rate hike.
Next week begins what is expected to be the strongest earnings season in nearly eight years, with potential growth of 18 percent. The concerns over a trade war have taken their toll on the markets. Prices are lower than just three weeks ago.
Lower markets
(since 3/12)
Technology: down 7 percent
Materials: down 5 percent
Financials: down 5.5 percent
Industrials: down 3.4 percent
Source: CNBC
Because prices are lower, but earnings estimates have not changed, stocks are considerably cheaper on a forward P/E multiple than even three weeks ago.
S&P 500
(forward P/E multiple)
Jan. 29: 18.5
March 13 : 17.2
Today: 16.8
Source: Thomson Reuters
Next week, the markets will turn to earnings, and here there is good news and bad news.
Good news: Early reports are off-the-charts good. A small group of companies — 23 of them, mostly those with quarters that end in February — have already reported. It's a diverse bunch, including Monsanto, McCormick, FedEx and Oracle.
S&P 500 earnings: The first reports
(23 companies)
Earnings: up 27 percent
Revenue: up 11.5 percent
"These are the best earnings and growth since 2010, the aftermath of the financial crisis," Nick Raich, who tracks earnings estimates as The Earnings Scout, told CNBC. "This is phenomenal growth."
And Raich does not believe the numbers will flag. Earnings for the rest of the are at 18.4 percent growth overall, also the highest since 2011. "I believe the strong upward trend will continue, and I believe first-quarter earnings will end up over 20 percent," Raich told me.
Here's the bad news: Analysts are keeping earnings estimates for the rest of the year in sky-high, record territory, with nearly 20 percent growth in every quarter.
That means the risk is to the downside, since expectations are very high.
Can the guidance really live up to the hype?
Raich believes it can. "Estimates for the second, third and fourth quarter have been going higher almost every week this quarter, which we have not seen since 2011. For years, every season we have seen earnings get cut right after they report, but in the past two quarters they have been rising."