Market Pulse with Dan Sheehan

Good Morning Investors,

The market is calling the tariff bluff. Tech continues to climb higher, fueled by AI momentum and Nvidia's rise to the top of the valuation ladder. Meanwhile, economic data keeps sending mixed signals, cooler than red-hot, but far from collapsing. That's been enough for investors to hold their nerve. Futures are slightly higher this morning, shrugging off Trump's latest trade barbs and looking toward key labor data and services PMIs. The mood is cautious but constructive, as traders weigh policy uncertainty against resilient fundamentals, and more importantly, against the ever-growing pile of cash waiting for the next entry point.

OPENING BELL

Markets are holding their ground in the face of escalating trade tensions, rising bond yields, and political theatre on both sides of the aisle. Futures ticked higher this morning, with the S&P 500 up 0.2%, Nasdaq 0.2%, and the Dow 0.1%. Tech is still the engine, with Nvidia pushing further into uncharted valuation territory and Broadcom riding the AI tide.

Tuesday's rally added to a strong start to June: the S&P 500 is now less than 3% off its high, the Nasdaq within 4%, and the Dow is building a quiet but steady comeback. The rally feels increasingly durable, despite tariffs, not because of them.

MARKET FRAMEWORK

Wells Fargo got a long-awaited break, with the Fed lifting its seven-year-old $1.95 trillion asset cap. That frees the bank to pursue long-stalled growth, especially in credit cards, wealth management, and commercial lending. The cap was imposed after the fake accounts scandal and has been a major constraint on Wells' ability to compete with JPMorgan and Bank of America. Shares popped on the news, and the Fed's unanimous vote signals that Charlie Scharf's cleanup efforts have been given a clean bill of health. This opens the door for Wells to finally capitalize on its massive retail footprint.

Meanwhile, Nvidia reclaimed its crown as the most valuable company in the world. Market cap now stands at $3.444 trillion, narrowly topping Microsoft. The AI optimism remains relentless—and perhaps justified. Even amid $8 billion in missed sales, the stock surged. Whether that's AI strength or market momentum papering over cracks is a debate for another day. For now, the tape is bullish.

On the macro front, all eyes are on labor. Job openings unexpectedly rose to 7.39 million in April—bucking forecasts and adding weight to the idea that the economy is absorbing tariffs better than feared. Quits edged down and hiring remains tepid, but the labor market isn't cracking. Not yet. This resilience is key to the Fed's calculus and suggests the soft landing narrative isn't dead.

TECHNOLOGY EVOLUTION

Nvidia isn't just leading in market cap; it's driving sentiment across the entire tech ecosystem. The resurgence in tech is broader, though, with Meta, Alphabet, and Broadcom all gaining premarket. AI demand is fueling everything from servers (see HPE's solid quarter) to nuclear power infrastructure. The data center buildout is creating ripple effects across multiple sectors.

Constellation Energy's 20-year deal with Meta signals that the data center energy story is just getting started. These aren't short-term contracts—they're decade-long commitments that reshape entire industries. Nuclear power, once written off, is experiencing a renaissance driven by AI's voracious energy appetite.

Elsewhere, Nokia's defense-tech pivot is underway, teaming with Nvidia and defense firms on a multi-modal drone project aimed at protecting critical infrastructure. The €90 million revenue target by 2035 feels ambitious, but thematically, this is the kind of convergence we're going to see a lot more of—AI, defense, and infrastructure colliding. It's not just about chips anymore; it's about entire ecosystems.

CORPORATE FRAMEWORK

Earnings-wise, the picture remains mixed but encouraging. Hewlett Packard Enterprise surprised to the upside, helped by AI server demand that's showing no signs of slowing. The enterprise AI buildout is creating sustained demand for high-margin infrastructure products. CrowdStrike fell short of revenue expectations despite launching a $1B buyback program—a reminder that even cybersecurity leaders aren't immune to execution challenges.

Autoliv raised its dividend and reaffirmed 2025 guidance, signaling confidence in the auto safety market despite broader automotive headwinds. Reddit and Roblox both dealt with outages that highlighted the fragility of digital platforms, while Warner Bros. Discovery faced a shareholder rebellion over executive compensation—a sign that investor patience with media conglomerate struggles is wearing thin.

Tesla continues to struggle in China, where May deliveries fell 15% year-over-year, extending its slump to an eighth consecutive month. The Chinese EV market has become brutally competitive, with domestic players like BYD and Nio gaining ground through aggressive pricing. Price wars are eroding margins across the sector, and Musk's political posturing isn't helping Tesla's positioning in Europe either.

Meanwhile, Rocket Companies is drawing scrutiny over its $1.75B Redfin acquisition, with Senators questioning the antitrust oversight—or apparent lack thereof. The deal raises questions about market concentration in real estate services, particularly as mortgage rates remain elevated and housing market dynamics shift.

ECONOMIC FRAMEWORK

The ADP report lands today, though I'll be blunt—it's lost a lot of predictive power post-recalibration. The methodology changes have made it less reliable as a payrolls preview, so I'm not giving it much weight versus ISM services and Friday's official jobs report. That said, the broader labor data is sending a clear signal: the market is stalling, not collapsing. That's the Goldilocks scenario the Fed needs to see.

The bond market remains a mess of contradictions. Trump's tax-and-tariff combination is pulling yields in both directions—growth optimism lifting long-end rates, while inflation concerns and policy uncertainty are raising risk premiums. The 30-year yield remains near 4.96%, and the 10-year at 4.44%. These levels reflect a market that's pricing in both growth and risk.

We're in a policy tug-of-war. The deficit question is back in vogue, and provisions like Section 899 could raise the cost of US assets for foreign buyers. That might explain the upward drift in long-term yields—foreign buyers are demanding more compensation to stay involved. It's a dynamic that could persist as long as fiscal policy remains expansionary.

High-yield spreads have barely budged despite rising delinquencies in consumer credit. Auto loans and credit card defaults are ticking up, but we're not seeing that stress bleed into broader credit markets yet. The housing slowdown, ironically, is now easing the inflation burden—shelter has been 70–75% of core inflation, so that pivot should make the Fed more dovish through 2025.

STRATEGIC OUTLOOK

I remain constructive, but clear-eyed about the challenges ahead. The market has absorbed a lot—tariffs, tax uncertainty, geopolitical posturing—and is still pressing higher. That tells you something about underlying strength. We may chop around through June, but if we clear the July tariff and tax cliffs without major escalation, I think the rally I've been calling for since March becomes fully unleashed.

I'm not dismissing the risks. Tariffs matter, and a 10% across-the-board levy would still create a roughly 1% GDP drag. But we're no longer talking about the 15%+ worst-case scenario that had markets spooked earlier this year. That's manageable, especially with a labor market that's cooling but not collapsing.

The technical setup remains compelling. Rising short interest and a mountain of cash on the sidelines give this market dry powder and tension—exactly the ingredients for a second-half move to the upside. Credit conditions, while showing some stress in consumer segments, haven't deteriorated enough to trigger a broader tightening cycle.

Event risk remains the wild card. A tax and spending bill misfire could cause sharp pullbacks, but I'd view that as a buy-the-dip opportunity rather than the start of something more sinister. The same goes for the credit data—auto and consumer loan delinquencies are rising, but we're not seeing systemic stress yet.

The key is getting through the next 4–6 weeks without a major policy shock. If July clears cleanly, this becomes a very different story—one where resilience trumps recession fears and cash finally capitulates to the upside.

ANALYST MOVES

FINAL THOUGHT

The market is calling the policy bluff and betting on fundamentals over fear. Yes, we face headwinds—tariff deadlines, tax uncertainty, rising delinquencies. But we're also seeing labor market resilience, moderating inflation pressures, and a Fed that has room to pivot dovish if needed.

The setup for a strong second-half remains intact. We've got the technical ingredients (short interest, cash on sidelines), the fundamental backdrop (growth without overheating), and increasingly, the policy clarity (tariffs at 10% not 15%). If we can navigate the July challenges without a major breakdown, I expect the rally to accelerate rather than fade.

Until then, volatility is your friend, not your enemy. Any pullbacks should be viewed as entry points, not exit signals. The market has already priced in most of the worst-case scenarios—now it's betting on the best-case outcomes.

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.