This year, as the stock market confronts a multitude of risks, corporate earnings have often played the role of “trump card” (pun intended). That happened today, as companies continued to benefit from the Trump administration’s tax cuts and business-friendly policies.

Reports of strong corporate profits pushed stocks sharply higher Tuesday, relegating trade fears to the sidelines.

I’ve noticed that on financial television lately, the pessimists get treated as pariahs. (I watch CNBC, so you don’t have to.) As a contrarian, this unalloyed bullishness should give you pause. Investors still face many dangers, the escalating trade war chief among them. But today, strong earnings soothed most anxieties.

That said, stocks coughed up some gains in the late afternoon. The tech-heavy Nasdaq closed in the red, as investors pared back exposure to smaller-cap technology stocks out of concerns that they’re overbought.

The main upside catalyst today was Google parent Alphabet’s (NSDQ: GOOGL) second-quarter earnings results, which blew away expectations.

After the market closed yesterday, FAANG member Alphabet reported adjusted earnings per share (EPS) of $11.75, compared to consensus expectations of $9.59. Revenue came in at $32.66 billion versus the expected $32.17 billion. GOOGL shares rose 3.89%.

Before the opening bell this morning, Verizon Communications (NYSE: VZ) reported second-quarter adjusted EPS of $1.20, topping the consensus forecast of $1.14. Revenue for the period reached $32.2 billion, exceeding estimates of $31.78 billion and representing a year-over-year increase of 5.4%. The telecom giant added 398,000 new monthly-pay subscribers, surpassing the 352,000 estimate. VZ shares rose 1.50%.

This is a blockbuster week for earnings, with the focus on the large-cap technology stars that have been driving the broader stock market. On the earnings docket are Facebook (NSDQ: FB) and PayPal (NSDQ: PYPL) on Wednesday, and Amazon (NSDQ: AMZN) on Thursday.

All three companies are expected to excel on earnings. Amazon should do particularly well, in the wake of government statistics that show traditional and online sales grew significantly in June.

Total retail sales as reported by the U.S. Census Bureau were $506.8 billion in June, an increase of 6.6% from June 2017. Through the first half of this year retail sales totaled $2.922 trillion, up 5.5% over the same period last year.

Further good news arrived today via China. The country vowed to implement new stimulus measures to boost domestic consumption, such as corporate tax cuts and subsidies for small businesses.

In surprisingly upbeat news on the trade front, the chief trade negotiator of the incoming Mexican administration asserted today that he expected the renegotiation of the North American Free Trade Agreement (NAFTA) to come to a satisfactory conclusion in the next few months.

When bad news is good news…

Throughout the Middle East, strife is growing worse. Israel today shot down a Syrian jet fighter over the Golan Heights, agitating hostilities between the two traditional foes.

Tensions also are worsening between Iran and the U.S. As OPEC’s third-largest producer, Iran pumps 3.75 million barrels a day. But Iran has come under pressure, as the Trump administration pushes countries to cut imports of Iranian oil due to the country’s nuclear program.

Yesterday, President Trump posted a provocative tweet that was blistering in its condemnation of Iran, stoking fears of outright conflict.

But all of this bad news has a way of becoming good news. Over the past 12 months, geopolitical woes have caused supply disruptions, which in turn have propelled oil prices higher (see chart below, compiled with data from the U.S. Energy Information Administration).

Investors this year have interpreted higher oil prices as a bullish sign of economic vibrancy. As a result, the price of crude and the stock market have tended to move in tandem. We saw that dynamic in play today.

This sentiment could soon change, of course, if rising oil prices start to fuel inflation. But for now, Wall Street is cheered by rising oil prices.

West Texas Intermediate, the U.S. benchmark, rose 0.84% to close at $68.46 per barrel. Brent North Sea crude, on which international oils are priced, rose 0.41% to close at $73.36/bbl.

Goldman Sachs (NYSE: GS), which has been bullish on oil for most of 2018, stated last week that it expects Brent crude prices to retest $80/bbl before the year ends, on the strength of growing global demand and interrupted production.

It’s been a blowout earnings season, powerful enough to distract investors from the growing risk of tariffs. For today at least, Wall Street held the right cards to play a winning hand.

Tuesday Market Wrap

• DJIA: +0.79% or +197.65 points to close at 25,241.94
  
• S&P 500: +0.48% or +13.42 points to close at 2,820.40
  
• Nasdaq: -0.01% or -1.10 points to close at 7,840.77
  

Tuesday’s Big Gainers

• Constellium (NYSE: CSTM) +10.81%

Aluminum products provider excels on earnings.

• PGT Innovations (NYSE: PGTI) +8.45%

Window and door maker buys rival.

• Allegheny Technologies (NYSE: ATI) +7.01%

Metals maker impresses on earnings.

Tuesday’s Big Decliners

• Astec Industries (NSDQ: ASTE) -20.71%

Road construction equipment maker’s earnings disappoint.

• Beasley Broadcast Group (NSDQ: BBGI) -17.42%

Analysts take dim view of radio broadcaster’s stock offering.

• SMTC (NSDQ: SMTX) -10.03%

Wall Street gives thumbs down to chip maker’s revised 2018 outlook.

Letters to the Editor

“It seems that Brexit talks are collapsing. What’s it all mean for Britain and its economy?” — Larry G.

Most analysts contend that abandoning the European Union would make Britain poorer by undermining the country’s trade with the rest of Europe, in turn reducing the UK’s productivity and incomes. However, Brexit talks became so chaotic this week, speculation is arising that the ruling Tory government will submit the matter to another referendum. A re-vote would be a stunning development that no one expected. Stay tuned.

Questions about geopolitical risk? Drop me a line: mailbag@investingdaily.com

John Persinos is the managing editor at Investing Daily.