Stocks Rallied Nicely This Week Thanks In Part To A Trade Pause & Lower Inflation
Stocks soared on Monday after a temporary truce in the U.S.-China trade war. That was the big trade elephant in the room. The fact that the US and China are speaking and are on good terms is a good sign and helps remove fear of an all out trade war. That big fear that the tariffs would crush the global economy was the primary catalyst that sent stocks lower in February and March. Trump eased the tariffs in April and stocks soared. Now we are getting closer to trade deals which is very encouraging. In other news, inflation came in weaker than expected which is a very good sign.
Trade Truce Helped The Market Rally
On Monday, the White House announced a 90-day suspension on new tariffs targeting Chinese imports. This was a step in the “right” direction and helped the market rally nicely. This de-escalation will not only help the US and China it will also help the US strike deals with other trading partners. The pause offers both parties time to work toward a more durable resolution — which is a welcomed sign.
I like to focus on how the market reacts to the news. For now, the reaction is very positive. The market soared on the news and was up just about every day this week. The S&P 500 rallied, erasing its year-to-date losses and turned positive on the year. The same is true for the Nasdaq 100. Additionally, and equally impressive, both indices are now “only” 4% (or thereabouts) below their record highs. That’s very impressive considering they were both down over 20% 5-6 weeks ago! If we keep making progress like this, we can easily hit new highs very soon.
Inflation Cools, Lifting Hopes for Softer Fed
In other bullish news, inflation continued to fall which gives the Fed room to cut rates, if it wants to. This added to the rally. The latest Consumer Price Index (CPI) report showed inflation easing for the second straight month. Headline inflation rose at a 2.4% annualized rate in March — lower than February and below economists’ expectations. Core inflation, excluding food and energy, also softened to its lowest level in over three years.
Remember, the Fed has dual mandate: keep unemployment low and keep inflation near 2%. So far, it can check both boxes. If the data continues to improve, the Fed can stop raising rates and possible cut rates later this year. For markets, the prospect of a less aggressive Fed added another boost to risk appetite and stocks.
Fiscal Policy Vote Looms
In the middle of the week, attention turned to Washington D.C., where lawmakers prepared for a bigly vote on President Trump’s proposed tax and spending package. The bill, which includes cuts for both individuals and corporations, has become a focal point for investors.
The bulls want to see the bill pass because tax relief could stimulate corporate profits and consumer spending — two big wins for stocks. However, internal divisions remain, and some lawmakers cautioned that a vote could be delayed. Despite the uncertainty, the market remained mostly optimistic that some version of the package would eventually pass.
Corporate News
It was also a big week for many companies.
Wal-mart: Tariffs, Schmariffs
Wal-mart reported earnings and the company said tariffs are not really that big of a deal right now. The CEO also said that he’s ready to raise prices, if needed in the future.
Novo Nordisk CEO Resigns Amid Stock Slide
Shares of Novo Nordisk dropped sharply after CEO Lars Fruergaard Jørgensen announced his resignation. The company has faced rising pressure in the competitive obesity drug market, particularly from U.S. rival Eli Lilly. Novo has plunged over 55% since its 52-week high!
Charter Communications and Cox Announce Mega-Merger
Charter Communications surged following news of a planned merger with its cable rival, Cox Communications. The deal would create the nation’s second-largest cable operator as the industry adapts to the shift toward streaming.
UnitedHealth Rebounds After DOJ Probe
Shares of UnitedHealth fell hard after reporting earnings a few weeks ago. Then shares fell hard again when news spread that the Department of Justice was investigating the company.
Applied Materials Hit by China Export Curbs
Applied Materials rallied after reporting earnings which was encouraging news for tech stocks. Semiconductors have been under pressure most of this year but that could be changing.
Take-Two Interactive Delays Blockbuster Release
Take-Two disappointed investors with a weaker full-year outlook and news that the next Grand Theft Auto would be delayed. Despite topping revenue estimates, the stock dropped after cutting guidance.
Constellation Brands Gets Buffett Boost
Constellation Brands rallied after Berkshire Hathaway revealed it had more than doubled its stake in the beverage giant, signaling long-term confidence in the company.
Meta AI Delay
Shares of Meta fell on Thursday after the tech giant announced its AI model would be delayed.
Economic Data: Mixed, but Encouraging
The cooler than expected inflation data boosted sentiment, but not all economic signals were positive. April’s retail sales slowed, raising concerns about consumer momentum. On Friday, consumer sentiment came out at 50.8, which was the second lowest on record.
Global View: Trade Tensions and Geopolitics
While the U.S.-China tariff pause was the global headline, it’s not a permanent fix. Chinese officials indicated that 90 days may not be enough to bridge key disagreements, and analysts expect tariffs to remain in place through at least the end of 2025.
What’s Next: Risks and Opportunities
Despite the rally, analysts caution that volatility could return. In the short-term we are very overbought and due to pullback.
Strategists at Societe Generale noted that while “risk-on” sentiment may carry forward, further gains may require clearer policy outcomes and stronger fundamentals.
Conclusion: A Week of Relief, But Uncertainty Lingers
Wall Street’s rally this week marks a sharp reversal from weakness we saw earlier this year. The S&P 500’s rebound is impressive and underscores how sensitive markets remain to macro and geopolitical developments.
Looking ahead, the tug-of-war between economic data, fiscal policy, and international dynamics will continue to shape investor sentiment. For now, optimism has returned and that’s a good thing. Remember, in the short-term the market is very overbought and due to pullback. Short-term pullbacks aside, if we break out to new highs, we can easily have another bigly leg up from here.
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