Key Takeaways
- Tariff pause with China sparks strong stock market rebound
- AI, chipmakers benefit from new Saudi investment deals
- Volatility remains slightly elevated despite recent market strength
Since last weekend’s pause on tariffs with China was announced, stocks have been steadily regaining ground lost in April. On Tuesday, the S&P 500, Nasdaq Composite and Russell 2000 all posted gains of around 0.5%. For the week, the S&P and Russell are up 4%, while the Nasdaq has gained 6%. The laggard for the week has been the Dow Jones Industrial Average.
On Tuesday, the Dow lost 0.6%. Shares of UnitedHealth Group fell a staggering 18% on news their CEO would be stepping down, a miss on earnings and suspension of already lowered guidance for 2025. Because of the way the index is calculated the drop in UNH shares sent the broader index lower. Still, for the week, the Dow is up 2%.
The big news this week continues to be tariffs and trade. After announcing a reduction and pause in economic hostilities with China on Sunday, the Trump administration announced they were also cutting tariffs on de minimis packages (packages with values of less than $800) from 120% to 54%. Meanwhile, on the trade front, President Donald Trump is in the Middle East along with a number of business leaders.
While in Saudi Arabia yesterday, Trump secured $300 billion in deals with hopes of more over the next four years. The deals include significant investments in artificial intelligence. Advanced Micro Devices, Nvidia and Qualcomm are but a few examples of companies that stand to benefit from the new deals. Chips, data centers and energy investments were all touted as part of the deals being signed.
There are some other companies in the news Wednesday morning. Microsoft announced it would be laying off thousands of employees, including management. The company is looking to streamline itself in an effort to improve efficiencies. ESPN, which is owned by Disney, announced plans for its streaming service. The new sports service can be purchased as a stand-alone for $29.99 per month or as part of a package with Disney+ and Hulu for $35.99 beginning this fall.
Turning to earnings, we have a couple names worth watching. After the close Wednesday, Cisco Systems will announce. I have always found this company to be a good barometer for the global economy, so I will be listening to what it has to say. Then Thursday, before the open, Walmart will release its earnings. While most goods sold at Walmart are made in the United States, shopping behaviors and patterns at retailers like Walmart and Target are good ways of taking the pulse on the overall U.S. economy.
It’s a light day on the economic calendar. However, on Thursday, we’ll get the April read on the Producer Price Index as well as the latest Retail Sales report. On Tuesday, the Consumer Price Index came in weaker than forecast, surprising many. However, most economists didn’t expect the tariff effects to really take hold until late April or early May. Therefore, when the May reading is released next month, not only will the number itself matter, but how it’s interpreted in light of trade negotiations will be of interest.
For Wednesday, we’re coming off two days of substantial gains. We are comfortably above the 200-day moving average in both the S&P 500 and Nasdaq Composite, two requisites I have mentioned before I would feel bullish. The last remaining condition I’m waiting on is volatility. The VIX has contracted significantly from its highs, but at 18 it is still slightly above its historical average. If we can get back down around 16, I think it would be very bullish. As always, I would stick with your investing plan and long-term objectives.
tastytrade, Inc. commentary for educational purposes only. This content is not, nor is intended to be, trading or investment advice or a recommendation that any investment product or strategy is suitable for any person.
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