Investors’ hopes for a turnaround in stock misfortunes were emboldened after a midweek bonanza rally in major indexes trended higher to finish the week.
On Wednesday, after a 90-day pause on tariffs for most countries was announced, stocks ripped higher. The S&P 500 jumped 9.5%, posting its largest gain since 2008, while the Nasdaq Composite shot up 12% in its second-best day ever. The pause signaled the return of the Trump put, said Fundstrat Head of Research Tom Lee, meaning that President Donald Trump won’t tolerate too much pain in the financial markets. “The White House does care what the stock market is doing,” Lee said.
The enthusiasm didn’t last into Thursday, but stocks sharply rebounded on Friday. The broad-based index added 5.7% this week, and the Nasdaq Composite gained 7.3%. The White House said Friday that slightly over a dozen countries are working on trade deals, which may have contributed to the recovery Friday.
However, the markets aren’t out of the woods yet. Investors are still pricing in the 10% universal baseline tariff in place, and China is dealing with 145% tariffs, with no path in sight for negotiations. To make matters worse, China reciprocated Friday with tit-for-tat tariffs on the U.S.
“There are still a lot of questions that need to be answered—how are tariffs going to work out after a 90-day pause? How are businesses going to actually adjust their plans?” said Head of Data Science “Tireless” Ken Xuan during the weekly huddle.
But he remains positive, saying that a “win is a win, and a pause is better than no pause.”
Head of Technical Strategy Mark Newton agrees. “I don’t sense that this can continue to build upon itself and just take markets right back to new highs right away,” Newton said. He likes tech stocks, especially the Magnificent Seven, as valuations have come down sharply and tech remains the biggest profit center for the U.S. this year. Lee is of the same belief.
Chart of the Week
Despite the “two steps forward, one step back” move, stocks can still find their footing, as they have in the past, Fundstrat Head of Research Tom Lee said. “Outside of China, it is far less onerous,” he added. “Overall, the trade picture, as much as you might think things have gotten worse, it’s actually getting a little better.”
From a policy perspective, the next two key steps are: In the hands of team Bessent/Trump:
Get a deal with Japan
Have a phone call with China
We need Henry Kissinger’s ghost to broker that phone call PS: Commerce Secretary Lutnick is no doubt 100% aware the risks of the bond market liquidity worsening as his cronies at Cantor know this To me, timing matters. And I could see the White House pushing these to happen over the weekend
As i discussed on CNBC this morning, i believe Equities are in a 2-steps forward, one-step back type environment. While there stands a good likelihood that Equity markets have bottomed, i don’t see the path in the next few months as being straight up, but more likely a L-shaped market with lots of sideways consolidation ahead of a larger rally. The cycle composites tend to show the same, and this directly lines up with the likelihood of prolonged tariff negotiation. While i’m bullish for a move up into mid-May initially and then a larger rally starting in June, i feel this will prove to be a traders market, not a linear rally which trend followers might want. Trends for now still positive, and expect this latest churning gets resolved higher. Key for ^SPX 1.79% lies at 5313 on upside and cannot afford to get under 5115 on downside, so this is the near-term range to concentrate on for ^SPX 1.79%
Gold stocks continue to be one of the better performing areas in the entire risk asset spectrum in the short run. I discussed GDX 5.58% last night, and Gold’s push up has led GDX to show an opening gap this morning, rising more than 5%. While some might be tempted to think this stalls out, the trend remains quite bullish, and there are no technical sell signals on GDX based on any methodology. Any 1-2 day pullback, if/when this occurs, would represent a very appealing time to favor buying GDX for a push up to $55 and above. DeMark signals are not present on 60 minute charts, nor 240, nor Daily in a way that would suggest this is peaking. I continue to feel Gold and Gold stocks should be overweighted.
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- Get a deal with Japan
- Have a phone call with China
We need Henry Kissinger’s ghost to broker that phone call PS: Commerce Secretary Lutnick is no doubt 100% aware the risks of the bond market liquidity worsening as his cronies at Cantor know this To me, timing matters. And I could see the White House pushing these to happen over the weekend