Market Pulse with Dan Sheehan

Good Morning Investors

Markets demonstrated remarkable resilience Monday, with the S&P 500 ($SPY ( ▲ 1.54% )) breaking above 6,300 for the first time while digesting last week's impressive gains. The index has now closed above its 20-day moving average for 60 consecutive sessions, the longest streak since 1998. Historically, this pattern has preceded 12-month gains of 20 to 26 percent, with zero instances of declines three months later. This technical milestone underscores the structural momentum driving this bull market.

Futures Overview

Mixed signals this morning, with Dow futures down 50 points while S&P 500 and Nasdaq ($QQQ ( ▲ 1.54% )) futures hover near flat to modestly green. This consolidation reflects healthy digestion after a powerful run, not retreat.

Key Market Drivers

Big Tech earnings expectations are running at fever pitch. Tariff deadline pressure is building toward August 1st. Consumer resilience data continues to surprise positively. Fed policy recalibration expectations are building ahead of Chair Powell's speech today.

Market Breadth Analysis

The current rally maintains its narrow leadership profile, with the Magnificent Seven driving over 14 percent earnings growth versus under 4 percent for the broader S&P 500. This concentration dynamic raises the stakes for this week's tech earnings parade.

This Week's Marquee Events

Alphabet ($GOOGL ( ▲ 3.17% )) and Tesla ($TSLA ( ▲ 6.22% )) report Wednesday in the first true test of Big Tech's AI narrative. Alphabet faces scrutiny over its cloud division's positioning following the Wiz acquisition and growing competition from Microsoft Azure and AWS. Markets will focus on AI infrastructure monetization, YouTube's integration progress, and whether Search and advertising growth can hold up under pressure.

Tesla's results matter equally. This is the first major chance for management to show actual progress on full self-driving and provide hard detail on the 2025 robotaxi pilot. Musk's timelines are now viewed more skeptically. The market wants execution and realistic delivery milestones.

Earnings Growth Divergence

Bank of America models show the tech leadership group delivering 14 percent plus earnings growth while the remaining 493 companies in the S&P struggle to hit 4 percent. That divergence creates a binary setup where tech performance drives the broader market.

Software & Cybersecurity Thesis

Cybersecurity remains a standout. My overweight in IGV, highlighted at $80, is now pushing above $111. Structural demand for cloud security and network modernization continues to offer multi-year tailwinds.

Semiconductor Valuation Setup

The sector now trades at 30.5 times forward earnings, down from 35.4 times in June, despite making new highs and expanding to 12.9 percent of the S&P 500. That multiple compression creates a more attractive entry point for long-term investors.

Financial Sector Strength

My overweight to financials reflects a more constructive macro setup. Rate stability, improving credit quality, stronger trading revenues, and a more visible regulatory environment all support the case for this exposure.

Digital Asset Momentum

Bitcoin ($BTC.X ( ▲ 2.38% )) continues to consolidate around $119,000, with a base forming toward the next move to $136,000. Ethereum and Solana show signs of rotation potential as capital looks for the next leg of leadership.

Corporate Treasury Strategies

Trump Media's $2 billion bitcoin purchase shows the growing corporate tilt toward digital assets. But execution quality matters. MicroStrategy is up over 50 percent year to date, while Trump Media is down more than 40 percent, despite a similar headline strategy. Not all adoption is created equal.

Regulatory Tailwinds

Friday's passage of the stablecoin framework adds legitimacy. It gives institutions a clearer lane to operate and further integrates digital assets into broader financial markets.

Tariff Timeline Pressure

The August 1st deadline approaches with mixed commentary. Commerce Secretary Lutnick strikes a hopeful tone, but the EU's preparation for retaliation keeps tensions live. The market appears less sensitive to tariff headlines than earlier in the year, suggesting some adaptation or that risks are already priced.

Trade Impact Quantification

GM reported a $1.1 billion quarterly tariff impact, with potential full-year exposure up to $5 billion. That news pushed the stock down 3 percent, despite management claims of mitigation. Investors clearly remain cautious about how these costs play out in earnings and margins.

Fed Chair Powell Speech

Today's remarks at 8:30 AM ET come during the Fed's blackout window, so policy signals will be minimal. Markets will watch instead for his tone on economic resilience and trade risks.

S&P 500 Levels

Immediate resistance sits between 6,350 and 6,375. Support sits at 6,250 (20-day moving average) and 6,180 (50-day). Momentum indicators remain strong with minimal divergence.

Volatility Context

The VIX has slipped below 15 again, suggesting complacency. This creates potential for tactical hedging or optionality around earnings events.

Flow Trends

Inflow strength remains in tech and growth, while defensive sectors continue to see light outflows despite tariff uncertainty.

Europe Earnings remain mixed under the tariff shadow. There's potential value in industrials and luxury goods firms with US exposure.

Asia Japan saw a modest pullback, while China and Hong Kong posted gains in utilities and construction. Divergence in policy support is starting to show up in sector dispersion.

Commodities Gold softened on dollar strength. Oil declined for a third straight session, potentially creating opportunities in energy-linked equities.

Upgrades

Barclays boosts price targets on Palo Alto Networks and Fortinet, citing cloud security tailwinds

JPMorgan adds Nvidia to its Focus List ahead of earnings

TD Cowen raises its eBay target based on eCommerce momentum

Downgrades

Morgan Stanley cuts Deere on ag sector headwinds

Goldman Sachs trims estimates on Nike and Target due to margin concerns

Analyst rotation still favors tech infrastructure and cybersecurity while pulling back from consumer and industrial cyclicals.

Today's Key Events

8:30 AM ET – Fed Chair Powell speaks

10:00 AM ET – Richmond Fed Manufacturing Index (expected -4)

1:00 PM ET – Fed Governor Bowman

Consumer Indicators

NY Fed shows credit access improving even with high rates. Household expense preparedness is also rising, supporting consumption momentum.

The AI infrastructure wave rolls on through 2025. Semiconductors and software stay in leadership. Policy clarification on trade and regulation begins to reduce valuation risk premiums. This remains a bull market with structural support from earnings growth, strong technicals, and favorable policy tailwinds.

In this constructive environment, any earnings-driven weakness should be shallow and present quality buying opportunities. We maintain overweight positions in technology, financials, and industrials, as these sectors continue to demonstrate the strongest fundamental support and growth prospects.

Please feel free to reach out to me on LinkedIn or by email if you would like help navigating this market environment or have any planning-related questions.

Dan Sheehan

[email protected]

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