Good Morning Investors,
Markets are off to a roaring start this week, with futures pointing sharply higher on the back of a major U.S.–China tariff de-escalation. For traders, it’s tempting to chase the green. But beneath the headlines lies a more nuanced setup: strong technical resistance, a packed macro calendar, and positioning dynamics that could swing sentiment fast. The story this week won’t just be about tariffs — it’ll be about CPI, Fed expectations, and the durability of the bounce we’ve seen. Hold your nerve. This could be a defining stretch.
Pre-Market Action
Dow Jones Industrial Average futures jumped over 1,000 points (+2.4%), S&P 500 futures rose 3%, and the Nasdaq-100 surged 4.1% in early Monday trade. Tech led the rally, with Nvidia, Tesla, and Apple each up more than 5% in premarket action. Oil and the dollar climbed, while gold slipped as safe-haven demand faded.
US–China Trade Deal: The Pause That Refreshes?
The US and China reached a surprise agreement over the weekend to pause reciprocal tariffs and lower baseline rates to 10%, down from as high as 145% for US tariffs and 125% for Chinese retaliations. The 90-day agreement, announced from Lake Geneva after Treasury Secretary Scott Bessent met with Chinese officials, includes a framework for continued negotiations.
Under the terms, the US retains a 20% fentanyl-related tariff, meaning total Chinese goods still face a 30% tariff overall. Both sides signaled that broader talks will continue over the coming weeks, and the door remains open for a more substantial phase one-style deal, reminiscent of the 2018 trade truce.
Markets rallied on the news, with tech and trade-sensitive stocks rebounding sharply. But as Bessent noted, this isn’t a permanent fix. It’s a temporary path to stability — and the clock is already ticking.
Market Overview
It’s never as good as it seems, and it’s never as bad as it seems. After weeks of headline-driven fear and aggressive short positioning, this rally now has the ingredients of a classic squeeze event. Hedge funds leaning too hard into downside risk might be forced to cover if the S&P 500 breaks above the 5,750 level — a critical technical and psychological line that has capped previous moves. Get through that, and 5,800, even 6,000, comes into view. But that’s still a big “if.”
5,750 isn’t just a random number, it’s the former support from the November election night gap, broken in March and retested as resistance. It’s also where the 100- and 200-day moving averages now converge. We’re through that level in the premarket, but if this move is real, any pullback should find support there.
I’ve spent the last month highlighting the opportunity to accumulate quality names while others were panicking. That playbook has delivered, but the worst thing an investor can do now is chase the move with FOMO. Market success isn’t built in days like today, it’s built by staying rational when others aren’t. Consistency of deposits, discipline around allocations, and a long-term strategy aligned to your goals and risk tolerance: that’s where the edge lies. Emotional decision-making feels good in the moment, but more often than not, it backfires. Stay steady.
Macro Watch – Phase One, Again?
The U.S.–China tariff truce looks promising. Treasury Secretary Scott Bessent confirmed a 90-day pause on reciprocal tariffs, reducing baseline rates from 145% down to 30% on Chinese goods. This is a material de-escalation and feels eerily similar to the 2018 “Phase One” scenario. Back then, it took six months to formalize, so it’s likely we’re at the start of a rolling détente, not the end.
It’s bullish for sentiment, but don’t get carried away. This is a 90-day deal, not a permanent fix. Still, it removes a cloud of uncertainty, just as CPI data rolls in. If inflation prints cool and we finally see the first post-tariff data come through, that’s the catalyst for an upside breakout. If CPI disappoints, the rally likely stalls. The 5,750 level, again, becomes the pivot.
Tech, Tariffs and Transformation
This bounce, if it extends, will be led by tech. Tesla broke out on Friday and surged to $320. That puts $325 in play, with support now forming at $310 and $300. Nvidia is at $122 in the premarket, and I’m watching $115 as key support heading into earnings. Apple is trading around $210 and has formed an inverse head-and-shoulders pattern; a bullish formation with potential upside if it confirms.
Beyond the short term, I continue to believe AI is the most significant technology transformation in over 40 years. It is the fourth industrial revolution, with the scale and scope to match the steam engine, electricity, or the internet. The global AI market could hit $1 trillion by 2028/29, and the opportunity isn’t confined to just one sector.
Semiconductors and hyperscalers are the tip of the spear. Nvidia and AMD continue to dominate, but I also like exposure through SOXL, which I flagged as oversold in early April. Micron and TSMC are names I expect to rerate higher as chip demand recovers.
In the hyperscaler space, Microsoft remains the best positioned. Azure is the AI delivery mechanism for enterprise. Alphabet has been unfairly hit and still has deep potential in cloud and quantum. Amazon’s data infrastructure is unmatched, and I expect AWS to benefit as AI integration accelerates.
Meta is quietly strong. It can outspend most peers and is building a best-in-class open-source language model. Its AI investment supports ad-targeting improvements, and the market has underappreciated the monetization runway.
Cybersecurity is the natural companion to AI growth. Palo Alto is my top pick. As AI use scales, the need to secure data becomes even more urgent — and spend will follow.
But software is where I think the real value lies — the third or fourth derivative of AI. This is where productivity gains will be delivered. Salesforce is my top conviction name in that category, but I’m also watching SoundHound, Innodata, Elastic, and Snowflake.
Robotics and autonomy are also gaining traction. Tesla is still the name to own in that space. Optimus and self-driving remain future-facing bets, but there’s long-term value in staying early.
Analyst Recommendations – 12 May 2025
• CrowdStrike Holdings Inc: Wedbush raises target price to $475 from $395, citing increasing market share and product expansion.
• Lyft Inc: Daiwa Capital boosts target to $16 from $14 after stronger-than-expected Q1 results.
• Uber Technologies Inc: Daiwa Capital hikes target price to $76 from $68, based on raised 2026 EBITDA outlook and optimistic Q2 bookings forecast.
Final Word
We’ve been through a volatile stretch, but with the S&P 500 testing a critical level and macro risks easing, it’s not unreasonable to think we could be on the edge of a technical squeeze. But this is not the time to abandon discipline. The best investors aren’t those who predict the next 100 points — they’re the ones who build portfolios that endure the next 1,000.
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.