The S&P 500 surged to record highs this week, even as the market grappled with mixed economic signals, including a weak jobs report, new tariffs, and significant swings in mega-cap free cash flow. In the latest episode of DHUnplugged, titled ‘Fear and Greed,’ hosts Andrew Horowitz and JC Dvorak dissected the forces driving investor optimism ahead of key inflation data.
With about 80% of S&P 500 companies reporting earnings and nearly 90% beating EPS estimates, the hosts noted that investors are pricing in a positive outlook. However, the CNN Fear and Greed Index, currently near 61, suggests a tilt toward greed, raising questions about whether the market is overextended. Horowitz pointed to the index’s components, including Tom McClellan’s Volume Summation Index and his own proprietary KRI (Key Reversal Indicator), as tools to gauge market sentiment.
The market’s resilience comes despite a troubling jobs report on Friday, which showed unemployment at 4.1% but only 20,000 payrolls added, with a shrinking labor participation rate. Additionally, new tariffs of 10-12% on 60 trading partners have sparked 25-state lawsuits, and Nike reportedly received a tariff refund. Oil’s rebound followed Treasury Secretary Scott Bessent’s failed deal timeline, leading to a profitable client trade that Horowitz doubled up on.
Horowitz emphasized the importance of contrarian thinking in such uncertain times. “When people are freaking out, it’s usually the time to get in. When people are like, oh my God, it’s never gonna get worse, the market rally is gonna continue forever, it’s like time to get out,” he said. Dvorak challenged the idea that proprietary signals used by firms like Jane Street remain private while retail-facing indicators become content. Horowitz responded, “It’s content. That’s what it seems like to me at least.”
A deeper dive into mega-cap free cash flow revealed stark contrasts. Apple’s free cash flow rose by $7.5 billion (31%), while Microsoft fell $6 billion, Meta plummeted 91% due to Mark Zuckerberg’s renewed AI spending, and Amazon swung from $18 billion positive to $7.6 billion negative. Alphabet flipped negative, Tesla reported a $1.09 billion outflow, and Intel worsened by $7.37 billion after a $20 billion secondary offering. Nvidia stood out with a $22.5 billion increase, supported by a $500 billion financing backstop.
The episode also covered SoftBank’s $2.2 billion quarterly profit driven by Masayoshi Son’s Intel stake, ByteDance’s OpenAI funding, and a heartfelt recap of the Fort Lauderdale meetup honoring the late John C. Dvorak, attended by 35 listeners. As the market awaits Wednesday’s CPI and Thursday’s PPI releases, the hosts question whether the current optimism is sustainable or a sign of froth. For more insights, listeners can access the full episode on the DHUnplugged website, Apple Podcasts, Spotify, and Amazon Music.
