Good morning investors,
Markets open this Tuesday in a cautious mood, with investors bracing for the Fed’s rate decision and closely tracking trade war developments. After snapping its longest winning streak in two decades, the S&P 500 enters the day lower, weighed by new tariff threats, CEO uncertainty, and shaky corporate confidence. Against that backdrop, tonight’s earnings from AMD and Super Micro could provide a key litmus test for sentiment in tech — the sector still viewed as both growth driver and safe haven.
Before the Bell
Stock futures slipped early Tuesday, with S&P 500 futures down 0.7%, Nasdaq futures off 0.9%, and Dow futures lower by 0.6%. Tariff uncertainty continues to dominate. President Trump’s weekend remarks — including proposed tariffs on pharmaceuticals and a 100% levy on foreign films — raised the stakes. Trade negotiations with Canada kick off today, while rumors swirl of pending deals with India. Still, markets are skeptical. The dollar edged lower, oil rose on technicals and bargain hunting, and gold hit a two-week high as investors sought safety.
European markets are also on edge, with Germany’s political transition adding friction. Asia was more resilient, helped by improving risk sentiment in China despite a soft services print. Bonds saw mixed flows — 10-year Treasury yields climbed to 4.35% after the ISM Services print surprised to the upside.
Market Framework: Choppy by Design
Volatility remains the dominant theme. As discussed yesterday, I don’t expect a clean breakout just yet. The S&P is still digesting April’s rally, and price action is largely headline-driven. There’s no strong bullish or bearish conviction — just a fog of short-term reactions as investors assess how deeply tariffs will bite.
Technically, we remain below resistance around 5730–5750. A pullback from these levels is possible, especially if the Fed fails to reassure. But I still see limited downside — maybe 50% of the recent rally — before the market resets for another leg up. The tone of Wednesday’s Fed press conference will matter more than the rate decision itself. I expect a “monitoring the data” message but believe a cut is coming in June.
Macro catalysts remain in play: second-half tax reform could emerge as a surprise positive, and any material trade deal (especially one involving AI chips or pharmaceuticals) would spark renewed risk appetite. We’re also entering the mid-year rebalancing window — a period that could see institutional flows shift further into tech and AI-linked cyclicals. The foundation is improving, even if the scaffolding is shaky.
Big Tech: Still the Market’s Safety Trade
Despite the tariff noise, Big Tech continues to deliver. Ex-Nvidia, the Magnificent Seven have beaten consensus by 16% this earnings season — far above the rest of the S&P. That’s kept the broader market afloat, with hyperscalers reaffirming or even raising their AI-driven capex guidance.
Meta lifted its spending targets, Amazon reported triple-digit growth in its AI services, and Microsoft and Alphabet held firm on infrastructure investment. The market still sees this group as essential — and safe. If there’s any pullback around the Fed, these remain long-term buys.
Even amid a potential breakup order from the DOJ, Alphabet’s forward valuation has dropped to recession-era levels. And while some AI multiples have been questioned after last month’s DeepSeek volatility, earnings results from the past fortnight have done more to confirm the AI thesis than undermine it.
Spotlight: Nvidia, Alphabet, Meta
Nvidia trades below 25x forward earnings — a sharp discount given expected growth and a dominant AI position. Fears over a slowdown in data center demand haven’t yet materialized, with Microsoft and Alphabet both confirming robust spending. If chips are part of a trade deal, watch for Nvidia to clear $115, with AMD potentially breaking $100.
Alphabet, at 17x forward earnings, is being priced for recession and regulatory defeat. Yes, the DOJ wants to break up its ad-tech stack. But advertising rebounds with the economy, and its search moat still prints cash. Meta looks even more attractive at 22x earnings — cheap relative to its growth and free of looming court cases.
These are names to buy now, not later. They remain deeply embedded in global economic activity and stand to benefit from both cyclical and structural tailwinds.
Corporate Highlights
Ford suspended guidance due to tariff uncertainty, expecting a $1.5 billion earnings hit.
Mattel also withdrew guidance, planning price hikes to offset rising input costs.
DoorDash will acquire Deliveroo in a $3.85B deal, betting on scale and localization.
Palantir raised its sales forecast, but modest beats disappointed investors.
Berkshire Hathaway stock fell 5% after Buffett confirmed his exit by year-end.
Other names to watch include Vertex (missed on Trikafta sales), Duke Energy (beat on strong demand), and Coterra (cut capex on macro caution). IAC surprised on cost control, and Diamondback’s post-merger output disappointed.
On the earnings front, today brings updates from AMD, Super Micro, Rivian, and Electronic Arts. These will help shape the AI and consumer spending narratives heading into mid-May.
Fed in Focus: A Placeholder, Not a Pivot
Expect no action and lots of nuance. Powell is likely to reiterate a data-dependent stance. The ISM services print beat expectations, but sentiment remains split — especially among small businesses navigating tariff chaos. Treasury yields have drifted higher, with the 10-year at 4.35%, reflecting modest confidence in growth.
Rate cut expectations are muted for May — just a 2.7% chance — but I maintain June as the likely pivot. The key risk now is Fed language being interpreted as too hawkish in a fragile macro backdrop. Still, the biggest driver remains tariff clarity. Without it, chop prevails.
Final Thought
Markets don’t need perfect conditions — they need direction. Right now, that means clarity on trade, confirmation of growth, and a Fed that doesn’t overplay its hand. The Magnificent Seven are doing their part. Now it’s up to policy.
There’s a quiet resilience beneath the surface. Earnings aren’t perfect, but they’re better than feared. Policy uncertainty is high, but so is corporate adaptability. And valuations — in many cases — are already pricing in a world of trouble. That’s often where the best opportunities hide.
Buffett’s retirement reminds us that patience, discipline, and rational optimism still win in the end. So while the headlines may shout chaos, the signal is more constructive. Stick to the fundamentals, keep dry powder ready, and don’t underestimate the strength of a market that refuses to break.
Dan Sheehan
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.