(Justin Vaughn, Editor, Options Trading Report)
Coming up this week, a host of 1st quarter earnings reports continue, with 80% so far released beating previous year’s 1st quarter earnings. The Bureau of Labor Statistics will announce the CPI (Consumer Price Index report) with the Census Bureau releasing retail sales data for April, and the University of Michigan’s Consumer Sentiment Survey, conducted by Janet Hsu, will come Friday.
Last week was docile, a welcome week for investors and traders unlike the weeks after President Trump announced the tariffs, when market pandemonium swept the indexes. As the U.S. and the United Kingdom negotiated tariffs, and agreed to move forward, a settling of fears seemed to calm market concern…at least in the short term. Mark Hackett, Chief Market Strategist for Nationwide Investment Management Group, eloquently phrased it…” I think original enthusiasm around trade deals is giving way to the realistic prospect that it’s going to take a while. We need a week without chaos, as a lot of the emotionally reactive behavior seems to be gone.” As the week closed, the bond market also took a breather with steady yields. Several Federal Reserve Board Governors have suggested any cuts before Fall seem improbable.
Great news was abundant Monday morning… as a “temporary agreement” announced by President Trump, cutting tariffs from a near high of 145% back to the 30% area ignited stocks, with the Dow Jones Industrial Average soaring over 1,100 points, or 2.,8%. The S&P 500 followed, up 3.3%, while the Nasdaq Composite shot up 4.3%. The U.S. China’s pause of 90 days on tariff negotiations gave investors more cause to jump-back-in-the-market. The magnificent 7 lurched ahead with significant gains, adding a collective valuation of $830 Billion in market value according to Dow Jones Market Data, as techs in general regained momentum. Also President Trump executed an executive order slashing drug prices, some near 50% lower. The dollar, along with bond yields finished stronger. “Of all the trade deals, this is one that really matters for the U.S.economy. The tariff rate is still elevated but it brings down the overall U.S. average tariff rate to around 12%, indicating a much smaller negative impact on the economy,” said Seema Shah, chief global strategist at Principal Asset Management.
The CPI defied Wall Street prognosticators expecting a reading of 2.4%, but coming in at 2.3%, easing slightly with the lowest since April 2021. Investors and traders, and economists were guarded that tariff implications were still not reflected in the recent CPI. “Investors are trying to get back aligned with a growth narrative,” said Robert Haworth, senior investment strategist at U.S. Bank Asset Management. The Dow Jones lost 270 points on Tuesday, while the S&P 500 and Nasdaq Composite were positive, up 0.7 and 1.6% respectively, The 10-year Treasury yield was steady at 4.498% , up just a bit from 4.454. The dollar was weaker while gold, after rebounding 0.6% Tuesday, was trading at $3,240.30 a troy ounce. Wednesday’s market was mixed as the Dow Jones finished just below flatline while the S&P 500 and Nasdaq were just above flatline. The S&P 500 reached a 1st time high this year, equaling its high in February, with the index ‘coming back’ 18% from its bottom in early April when President Trump announced the severe tariffs. Investors alike are breathing easier as major progress has given the market a scene of stability.
RUMBLINGS ON THE STREET
Bill Ackman, Billionaire Hedge Fund Manager, Founder and CEO of Pershing Sq. Cap, Management, Barron’s – “We are in the process of destroying confidence in our country as a trading partner, as a place to do business and as a market to invest capital.”
Jay Hatfield, Chief Executive at Infrastructure Capital Advisors, WSJ – “I do think all eyes are on China. Half the trade problems are China and the other half is the whole rest of the world.”
Warren Buffett, CEO Berkshire Hatherway, WSJ – “We only swing at the pitch we like, “Buffett at last year’s meeting. “It isn’t like I’ve got a hunger strike or something like that going on. It’s just that things aren’t attractive.”