Market Pulse with Dan Sheehan

Good Morning Investors,

Markets continue to juggle a complex mix of strong tech momentum, renewed tariff concerns, and evolving inflation data. On Tuesday, the S&P 500 ($SPY ( ▼ 0.44% )) lost 0.4 percent and the Dow ($DIA ( ▼ 0.78% )) fell 0.7 percent following hotter-than-expected inflation data, while the Nasdaq ($QQQ ( ▼ 0.29% )) bucked the trend, rising 0.2 percent on strength from Nvidia ($NVDA ( ▲ 1.02% )).

U.S. stock futures pointed to a mixed open early Wednesday as investors weighed fresh earnings results and prepared for another inflation check. Dow futures edged slightly higher, S&P 500 futures were flat, and Nasdaq 100 futures slipped 0.2 percent after a tariff-driven growth warning from ASML weighed on sentiment.

June’s Consumer Price Index confirmed what many had warned: tariffs are beginning to show up in the data. The headline CPI rose 2.7 percent year over year, up from 2.4 percent in May. Core inflation also ticked higher to 3 percent. Categories including furniture, apparel, and household appliances reflected the largest price pressures.

Though the increases were broadly anticipated, they add another layer of complexity for the Federal Reserve. With the labor market still resilient and inflation edging higher, markets have sharply reduced expectations for a rate cut in July and even September now hangs in the balance. The CME FedWatch tool currently shows near certainty of no change this month, with September now close to a 50-50 proposition.

In my view, while tariff-driven inflation might add temporary upward pressure, it is unlikely to derail the longer-term disinflationary trend. If we measured inflation as Europe does, our comparable rate would align closer to 2 percent, supporting the case for eventual rate cuts later this year.

Despite near-term choppiness, I remain overweight equities with an S&P 500 year-end target of 6,500. Global M2 is at record highs, and AAII data shows cash allocations falling, indicating investors are finally redeploying sidelined capital.

Institutional positioning remains underweight; hedge funds and large asset managers have lagged the rally and now face pressure to chase performance. Historically, late July can see volatility, but as last year’s yen carry trade reminded us, even August volatility did not stop equity gains.

I continue to favor tech and industrials. In crypto, Ethereum and Solana stand out for potential catch-up trades, while Bitcoin could offer buying opportunities as regulation bills stall in Congress. I also think there could be a continued move in the leveraged Ethereum plays. We have seen the success of Strategy ($MSTR ( ▼ 4.17% )) and I believe that we could see continued upside in SharpLink Gaming ($SBET ( ▼ 8.15% )) I think we are entering a period of altcoin outperformance relative to Bitcoin.

Bank of America reported earnings of 89 cents per share versus expectations of 86 cents, but revenue slightly missed at $26.61 billion. Net interest income rose 7 percent but fell short of analyst estimates, weighed by softer loan spreads. CEO Brian Moynihan noted resilient consumer spending and healthy commercial loan utilization.

ASML shares fell over 6 percent after the company warned that it cannot confirm growth in 2026 despite beating Q2 expectations. While second-quarter sales and profits exceeded estimates, geopolitical tensions and tariff uncertainty are clouding the forward outlook. Net bookings, however, were strong at 5.5 billion euros, reflecting robust AI demand.

Nvidia announced plans to significantly increase supply of its H20 chips to China following eased U.S. export restrictions. CEO Jensen Huang indicated that Nvidia would continue to pursue advanced chip sales in China as permitted, viewing the market as critical for long-term growth.

Other notable updates:

Tariff policy remains in sharp focus. President Trump has pushed new 30 percent tariffs on imports from Mexico and the EU starting 1 August, and trade tensions with China remain a key variable. While near-term volatility is expected, broader sentiment toward China remains relatively stable, especially with developments like Nvidia’s resumed chip exports.

Indonesia's agreement to a new trade deal with the U.S., including a 19 percent tariff on exports, adds another layer to the already complex global trade environment. Meanwhile, EU and South Korea continue to seek agreements to soften the impact of pending U.S. tariffs.

Wednesday brings the Producer Price Index (PPI) at 8:30 a.m. ET, expected to show a 0.2 percent month-over-month increase. This follows Tuesday’s CPI data and will provide further insight into upstream inflation pressures.

We’ll also see industrial production data and the Fed’s Beige Book, offering a window into regional economic conditions and potentially guiding September policy expectations.

Bank of America's Fund Manager Survey shows the most bullish sentiment since February, with only 9 percent now expecting a hard landing. This compares to 49 percent at the height of the April tariff escalation. While optimism has returned, the backdrop of policy uncertainty and inflation remains a reminder to stay focused on fundamentals.

Tariffs and inflation are again front and center, but beneath the surface, strong corporate earnings, robust consumer resilience, and global liquidity dynamics continue to support the bull case. The recent pullback in certain sectors offers opportunities rather than threats.

My strategy remains anchored on staying invested, favoring high-quality growth plays in tech and AI, selective cyclicals in financials and industrials, and targeted crypto exposure. As always, separating noise from signal and maintaining discipline are critical.

Dan Sheehan

[email protected]

This newsletter is for informational purposes only and should not be considered investment advice. Please consult your financial advisor about your specific situation.