Stocks closed mixed yesterday, after erasing early-day losses and trading mostly higher for much of the day.

The Dow was up, along with the small-cap Russell 2000 and mid-cap S&P 400. The S&P 500 and Nasdaq closed moderately lower.

Late-day comments from President Trump concerning China took stocks off their highs.

President Trump put out a post on Truth Social saying that "he believes China purposefully not buying our soybeans, and causing difficulty for our soybean farmers, is an economically hostile act. We are considering terminating business with China having to do with cooking oil, and other elements of trade, as retribution." He continued by saying, "we can easily produce cooking oil ourselves, we don't need to purchase it from China."

Sunday's more conciliatory tone, which helped stocks rebound on Monday, gave way to a more confrontational one yesterday, similar to Friday's.

President Trump and President Xi are still expected to meet two weeks from now at the APEC summit in South Korea to talk about trade.

As for yesterday's trading, it should be noted that the small-cap Russell 2000 led the way with an outsized gain of 1.38%, and making a new all-time high in the process.

The Russell is the only index to have completely erased Friday's drop, and then some.

This underscores the small-cap renaissance we've been seeing.

Small-caps have lagged for several years. Big-cap tech has dominated the trade, especially AI related names. And quite frankly, the AI trade is expected to continue for years to come.

But they are not the only game in town anymore. With the resumption of interest rate cuts (25 basis point cut in September, and another one expected in late October, and then again in December), coupled with the recent tax cut provisions for corporate America, including the 100% immediate cap-ex expensing (which allows companies to accelerate their growth plans and get the entire tax benefit in year one), the stage is set for a very friendly environment for small-caps.

While it's true that all-sized companies should see relief with lower interest rates, since small-caps tend to have a larger proportion of debt than their bigger counterparts, and often borrow at less favorable terms, the interest rate cuts should have a sizable impact on small-caps.

Additionally, since small-caps are in the earlier part of their growth cycle when they look to grow and expand the fastest, the tax provisions should also provide a relatively larger benefit to small-caps.

All in all, I am not surprised to see the small-caps responding so well. It's been a long time coming. And I'm expecting even bigger things from them.

In other news, earnings season unofficially kicked off with a bang yesterday.

Before the bell, JPMorgan reported a positive EPS surprise of 4.97%, and a positive sales surprise of 3.50%. That translated to a quarterly EPS growth rate of 16.0% vs. this time last year, and a sales growth of 8.86%. CEO Jamie Dimon said the impact of tariffs "has been less than people expected, including us." They were off -1.91% for the day yesterday.

BlackRock also reported before the open and posted a positive EPS surprise of 3.22%, and a positive sales surprise of 4.16%. That equated to a quarterly EPS growth rate of 0.79%, and a sales growth of 25.2%. They were up 3.39% yesterday.

We also saw positive EPS and sales surprises from Citigroup, Goldmans Sachs, and Wells Fargo.

Today we'll hear from Bank of America, Morgan Stanley, and PNC Financial.

See you tomorrow,