What we need to see on the tape to break this S&P 500 range for good

The S&P 500 is up in early trading, with tidy contributions from Apple and Berkshire Hathaway pushing the blue chips toward a fifth-straight daily gain.

But in a note published Monday, Morgan Stanley’s chief US equity analyst, Mike Wilson, said breakouts for stocks will likely be temporary unless a few key issues can be put to rest. He wrote:

“While a modest/brief overshoot of 5500 can persist very short-term, a sustained break above the next level of resistance (5600- 5650) is likely dependent on developments that have yet to come to fruition: (1) a tariff deal with China that brings down the effective rate materially; (2) a more dovish Fed; (3) back-end rates below 4% without recessionary data; and (4) a clear rebound in earnings revisions (see 1Q Earnings Update for more).

Bottom line, until we see clearer risk-on shifts in these factors, range trading is likely to continue.”

Market watchers at JPMorgan also seem to think the S&P 500 will meander within a range, pending the resolution of such issues.

“Based on many recent investor discussions, the sentiment is very bearish, especially within the macro community. Most are disregarding the latest trade developments, in part due to ‘Trump exhaustion.’ We observe that many prefer to stay in cash and maintain lower leverage in their books as they await greater policy clarity... In our view, the deescalating trade talks in recent days has certainly lowered the left tail risk and the probability of a bear case (i.e., the distribution of outcomes is narrowing vs. a few weeks ago). This suggests S&P 500 is more likely to spend time range bound this year.”

Here’s the thing. It’s going to take time for President Trump’s effort to upend the world’s decades-old economic system to show up in hard data.

The flow of Q1 earnings reports hits peaks this week, with 180 S&P 500 companies reporting. But given the rapid changes over the last month or two, those numbers seem so out of date they might as well be written in cuneiform.

True, the executive comments on earnings calls could color in the picture a bit. But in reality they seem to show that CEOs are just as clueless as the rest of us as to where all this goes, given the on-again, off-again pausing, not-pausing approach the White House is taking on tariffs.

And Q1 GDP data, the marquee economic report of the week due Wednesday, will be incredibly noisy partly because of a rush of activity aimed at getting ahead of the tariffs, thus providing little in the way of a signal.

So, it seems like as good a bet as any to assume we’re going to be spinning our wheels for a while. But who knows?