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Market Report for Monday, May 12, 2025

Last Thursday, President Trump said “buy.” Investors saluted, clicked, and positioned for a trade breakthrough. On Monday, they got one. Nothing moves risk-on sentiment quite like 115 percentage points of tariff relief and a bullhorn cranked to 11.

Level Change 5/12/25 (%)
– – – – – – – – – – – – – – –
+2.8 Dow
+4.4 Nasdaq
+4.0 Nasdaq 100
+3.3 S&P 500
+3.5 S&P 400
+3.7 S&P 600

Stocks exploded Monday on word that US-China tariffs will fall sharply for at least 90 days, a ceasefire engineered in the Alps and packaged as a Trump-branded miracle. The S&P jumped 3.3%, putting it within 5% of February’s record close and nearly flat on the year. When you open a 145%-tariff umbrella, closing it looks bullish.

Per the new deal, the US will slash its levies on Chinese goods from 145% to 30%, while China trims its 125% bite down to a daintier 10%. That 30% US number includes 10% for general irritation and a 20% fentanyl-linked penalty—because nothing has hampered US progress more than synthetic opioids.

The deal exceeded expectations. Just Friday, Trump floated 80% as a target, and weekend press whispers pegged a best-case cut at 50%. Instead, negotiators in Geneva spun a full policy pirouette. Treasury Secretary Scott Bessent declared “neither side wants a decoupling,” and everyone nodded like they hadn’t just spent two months saying the opposite.

The relief rally lifted all boats, tech luxury yachts first. Amazon and Meta led the Mag 7 charge with 8% gains, as optimism spread like a social media algorithm freed from content moderation. Even small caps joined the parade, wedged into the jet-ski compartment.

Outside of tariffs, the GOP’s reconciliation bill reached a $5T price tag—$500B over budget and still not counting Trump’s tax-cut promises. Medicaid cuts were reportedly dialed down, either to soften the optics or because someone hid the scissors.

Elsewhere in Washington, Trump announced a “most favored nation” drug-pricing policy. That means benchmarking US drug costs to cheaper foreign prices, a move sure to delight American patients and irritate every pharma lobbyist with a golf membership. Without the ability to fleece Americans, big pharma might need to hold their meetings at Marriott instead of Monaco.

The Fed’s April Senior Loan Officer Opinion Survey on Bank Lending Practices (SLOOS) report found banks tightening the screws on credit card lending, while leaving auto and other consumer loan standards mostly unchanged. Businesses of all sizes reported cooling credit appetite, and lenders seemed in no hurry to reignite it. The message to stretched households inching toward the checkout: bring cash—and maybe a coupon.

Fed Governor Adriana Kugler noted the economy’s resilience, but warned that tariff-related price hikes may outlast the tariffs themselves. If only she’d scheduled her remarks before the post-tariff party. All she could do was nod politely and admit the weekend deal was “obviously … an improvement” in trade relations.

Naturally, better trade news means worse odds for rate cuts. In this upside-down logic, progress is a problem. Markets now expect just over 50 basis points of Fed easing this year, down from 100 two weeks ago, before Geneva gave Powell a reason to keep his hands in his pockets.

Monday wrapped a classic Trumpian trade whiplash: Threaten, escalate, spook stocks, then declare victory near the original starting line. Stocks soared. Mission accomplished. Until the next tweet.

— Jason Kelly

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Market Report for Friday, May 9, 2025

Stocks tiptoed through Friday with all the urgency of a trade negotiator on lunch break. Hints of tariff relief danced through the headlines, but with more hemming than harmony, investors kept their feet mostly still.

Level Change 5/9/25 (%)
– – – – – – – – – – – – – – –
-0.3 Dow
+0.0 Nasdaq
-0.1 Nasdaq 100
-0.1 S&P 500
-0.1 S&P 400
+0.0 S&P 600

After two weeks of climbing on cautious optimism, the market decided to pause and ask whether the good news was real, or just lightly disguised hope. So far, the latter.

Friday brought more talk of US-China tariff “de-escalation,” though the president shifted his preferred rate from a rumored 54% to a firm-sounding 80%, which is de-escalation only if you’re grading on a Himalayan curve.

Still, the idea that tariffs might one day go from punishing to merely painful kept investors from bolting. Unfortunately, valuations already reflect a sunnier outcome. The S&P 500 is back to 21x forward earnings, which assumes double-digit growth through political crosswinds, supply chain snarls, and consumers who increasingly shop with their sighs.

The Fed, meanwhile, held its fire—and its script. The Fedspeak posse rode out Friday, each talking-point gunslinger sounding off in a slightly different register of “not yet.”

Governor Kugler pointed to economic resilience as a reason to wait. Governor Barr warned that tariffs could push inflation and unemployment higher, and not in a way that makes decision-making any easier. New York’s Williams delivered the high-school lesson: without price stability, there’s no economic stability. And Richmond’s Barkin reminded analysts that retailers can’t pass on costs to consumers who’ve already passed out.

In short: the Fed is in wait-and-see mode, a position that sounds to those hankering for a preemptive rate cut like nap-and-mutter.

Among individual stocks, Nvidia (NVDA -0.6%) made headlines for the wrong reasons—again—by prepping a weaker chip to dodge US restrictions and maintain its China presence. Taiwan Semi (TSM +0.7%), by contrast, flexed with a 50% revenue jump in April, as clients rushed to hoard chips before tariffs make them a luxury good.

In the real economy, Expedia (EXPE -7.3%) cut guidance and dimmed the lights on US travel demand, while Lyft (LYFT +28.1%) soared on a better quarter and the novel theory that tariff-bloated car prices might drive more people into rideshares. Why buy a $40,000 car when you can get chauffeured around by someone else’s student loan debt for $12?

It’s a fair point—and one the Fed may ponder, once it finishes pondering the last thing it pondered.

— Jason Kelly

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Market Report for Thursday, May 8, 2025

Wall Street did as instructed when President Trump told investors to “go out and buy stock now.” Thursday’s rally wasn’t so much a policy endorsement as a standing ovation for lower tariffs—with a familiar showman working the tent.

Level Change 5/8/25 (%)
– – – – – – – – – – – – – – –
+0.6 Dow
+1.1 Nasdaq
+1.0 Nasdaq 100
+0.6 S&P 500
+1.2 S&P 400
+1.8 S&P 600

Indexes extended Wednesday’s modest gains, fueled by talk of tariff relief and the first deal breakthrough, with the UK. Washington and London announced a “framework agreement,” prompting the president to dust off his megaphone and tell traders to buy stocks immediately.

The bigger ticket was China. Bejing strongman Xi Jinping “very much wants to make a deal,” according to the president, who said he might hop on a call if weekend talks in Switzerland go well. He floated the idea of slashing China tariffs from 145% to a cuddlier 50–54% as early as next week. It’s the kind of fuzzy optimism investors now crave, a volatile de-escalation loop complete with its own campaign slogan: We Make Things Worse to Make Them Better Again.

Behind the scenes, systematic strategies reportedly re-leveraged into the rally, with resilient retail buyers and corporate buybacks doing their part. No major movement on the budget standoff, though Trump did dangle a plan to hike the top tax rate to 39.6%.

Between his tariff tax hikes and pending income tax hike, the Commander-in-Household-Budget-Destruction is defying all political convention. Raising taxes has long been considered electoral poison, but Trump looks intent on testing his 2016 theory—that he could shoot someone on Fifth Avenue and not lose any voters—on kitchen-table accounting: I can blow up household budgets coast-to-coast and not lose any voters. Test in progress.

In macro land, the Fed’s decision Wednesday to hold rates at 4.25–4.50% surprised no one. The statement was more interesting, acknowledging growing risks to both inflation and employment. Chair Powell’s press conference walked a traditional tightrope to non-commitment. The Fed sees little harm in waiting, he said, and plenty in guessing wrong. Asked which half of the dual mandate might falter first, Powell essentially shrugged. When a ship’s taking on water at both bow and stern, debating which end hits the seabed first feels academic.

That uncertainty echoed in fresh data.

Initial jobless claims fell to 228K, matching forecasts, but continuing claims came in hot. Q1 productivity dropped more than expected, and unit labor costs surged at their fastest pace in a year. A mixed bag that won’t invite sweet dreams at the Eccles Building.

The New York Fed’s April survey showed a slip in 5-year inflation expectations, but the 3-year rose to its highest since July 2022. Households are growing gloomier about jobs and finances, and inflation expectations remain sticky, just like the Fed’s policy dilemma.

One bright spot: earnings keep humming.

Nearly 90% of the S&P 500 has reported, with earnings growth tracking around 13.5%, up from just 7.2% at the quarter’s start. About 77% have topped estimates, with upside surprises averaging more than 8.5%. Most firms are busy sidestepping tariffs and muting macro noise. Resilience is the theme; relief, the wish.

Thursday’s message? Stocks can rally while confusion reigns—especially if a ringmaster in a red tie shouts “Buy!” loud enough.

— Jason Kelly

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Market Report for Wednesday, May 7, 2025

After a nine-day rally ended Monday, stocks dropped again Tuesday as trade policy turned from “easing tensions” to “season two.” The new script features a familiar cast, louder plot twists, and a smaller budget for diplomacy.

Level Change 5/6/25 (%)
– – – – – – – – – – – – – – –
-1.0 Dow
-0.9 Nasdaq
-0.9 Nasdaq 100
-0.8 S&P 500
-0.7 S&P 400
-0.6 S&P 600

The S&P notched its second-straight loss, joined in the red by every other major index. Chalk it up to profit-taking, a defensive rotation, or plain old buyer’s remorse after the market’s nine-day sprint through last Friday. That rally erased the S&P’s tariff-triggered dip. Now, tariff concerns are back.

President Trump vowed to dictate tariff levels and trade concessions in future negotiations, putting a fresh spin on The Art of the Deal, now revised as The Art of the Ultimatum. His pledge joined a proposed 100% tariff on foreign films and a warning that pharmaceuticals are next in the sniper scope. China tariffs remain in place at embargo-level intensity, and the administration has yet to produce any deals, unless you count anxiety as a deliverable.

Treasury Secretary Scott Bessent tried to calm nerves, noting that deal announcements could come this week, a forecast that’s becoming more recurring than reliable. The Financial Times floated a potential pact with the UK to lower tariffs on steel and cars, though at this point, “potential” feels like a synonym for “fictional.”

Markets weren’t comforted. The tone has shifted from “relief rally” to “uh-oh.”

The March trade deficit ballooned to a record $140.5B. Exports barely budged, but imports jumped as businesses scrambled to stock up before the next round of tariff surprises. It’s the economic version of hoarding toilet paper—only this time, it helped tip Q1 GDP into the red for the first time in three years.

On the earnings front, Palantir (PLTR -12.1%) beat expectations and lifted guidance, only to be punished for its lofty valuation and international softness. AI stocks, like Broadway divas, are expected to dazzle without missing a note. One off-key moment, and they’re booed off stage.

Ford (F +2.7%) and Mattel (MAT +2.8%) both pulled full-year guidance over macro uncertainty … and investors applauded anyway. Apparently, deer-in-the-headlights is the new confidence. Admitting you haven’t a clue is considered peak transparency and fiscal discipline.

Looking ahead, the Fed delivers its policy statement today at 2 p.m. ET. No rate change is expected, but Chair Powell will likely remind everyone that tariffs are unhelpful to both sides of the Fed’s dual mandate: stable prices and strong employment. Rate-cut expectations have been dialed down to 75 basis points this year, from 100+ just a week ago. Call it the Fed kaput.

The market is still digesting last week’s high, this week’s headlines, and next week’s haze. But for now, the message is that tariff drama isn’t over, it just went out for a sandwich.

— Jason Kelly

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Market Report for Tuesday, May 6, 2025

After a nine-day sprint, stocks took a breather Monday. The S&P 500 fell for the first time since April 22, with sellers sniffing profit and buyers short on conviction. Not a rout—more like a shrug with side-eye.

Level Change 5/5/25 (%)
– – – – – – – – – – – – – – –
-0.2 Dow
-0.7 Nasdaq
-0.7 Nasdaq 100
-0.6 S&P 500
-0.2 S&P 400
-0.8 S&P 600

The headlines were spare, the volume was light, and the VIX looked like it was off birdwatching at pre-Liberation Day levels. After the best streak since Bush-era iPods, investors found themselves at a natural pause: part digestion, part nerves.

Trade talk was back to vague gesturing. President Trump hinted that tariff relief for China might arrive “at some point,” which, translated from politician to plain English, means somewhere between later and never. Elsewhere in trade, the White House rejected Japan’s request for a full exemption from retaliatory tariffs.

Hollywood got a fresh scare, too: the president floated 100% tariffs on foreign films, sending shares of Netflix (NFLX -1.9%), Disney (DIS -0.4%), Warner Bros. Discovery (WBD -2.0%), and Paramount (PARA -1.6%) down on fears of subtitles with price tags.

The ISM Services Index surprised to the upside, its best (thus worst) showing since February 2024. New orders surged, and prices rose again — not great news for those hoping inflation was bored of its comeback tour. The employment sub-index stayed in contraction territory for the second month, though slightly improved. So: more expensive stuff, fewer jobs to pay for it. A lesser-known verse in the hymn to greatness.

Earnings season is nearly out of ammo, with most themes priced in: stronger-than-feared Q1 results, soft Q2 guidance, and CEOs tossing up enough macro caveats to fill a private-jet hangar in Aspen.

The Fed meets Wednesday, but Chair Powell is expected to hold steady and say little. Except, perhaps, to remind everyone that tariff risks are about as welcome as a wasp in the punch bowl. Oh, and he’s still in charge of the central bank, and the Fed didn’t break this economy—it just works here.

Over at Berkshire Hathaway, Q1 operating earnings missed slightly thanks to California wildfire losses. That news was dwarfed by the bigger one: Warren Buffett will step down as CEO by year’s end. The succession plan remains in place, as do questions about what Berkshire looks like post-oracle. For now, BRK.B slipped just 0.3%, as if the market didn’t quite believe the GOAT would ever really leave.

If Monday had a mood, it was: “Don’t just do something, sit there.” After nine days of gains, that may be just what the doctor—or the central banker—ordered.

— Jason Kelly

_________________

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