Market Milestones: Trade, Tech, and Fed Hopes

Fresh news and strategies for traders. SPY Trader episode #1270. Hey everyone, and welcome back to Spy Trader, your goto podcast for navigating the ups and downs of the stock market! I'm your host, Market Marvin, and it's 12 pm on Friday, June 27th, 2025, Pacific time. We've got a lot to cover today, folks, as the market continues its fascinating dance, hitting new milestones and shrugging off some earlier worries. Let's dive right into today's market snapshot. The US stock market is showing cautious optimism. The S&P 500 index is at 6,141.02, up 0.80% for the day and on track to surpass its February record. It's climbed 4.96% over the past month and is up 13.19% from this time last year. The Dow Jones Industrial Average is at 43,386.84, up 0.94% today, gaining 2.6% in June and 2% yeartodate. The Nasdaq Composite is also having a stellar day at 20,167.91, up 0.97%, pushing towards a new record. It's up 5.5% in June and 4.4% yeartodate. Both the S&P 500 and Nasdaq Composite have hit new alltime highs this month, really bouncing back from those April lows. Now, let's talk sectors. Technology was the big winner in May, up over 10%, and continues to lead the charge in June, with chipmakers like Nvidia and Broadcom seeing significant gains. Communication Services was also a strong performer, and it remains undervalued, with Meta Platforms showing strong momentum. Financial Services and Energy led the pack last week. On the flip side, Healthcare was the only sector to lose ground in May and continued to struggle last week, with losses from Eli Lilly and UnitedHealth. Basic Materials also underperformed. Consumer Defensive is still considered overvalued, skewed by names like Costco and Walmart. What's driving all this? A major positive is the progress in USChina trade negotiations. A trade deal was signed just two days ago, which included a pledge from Beijing regarding rare earth materials. Plus, the White House indicated that deals with ten other countries are imminent and the July 9th deadline for reciprocal tariffs isn't critical. This has really cooled down those tariff concerns that were rattling the market. On the economic front, the May Personal Consumption Expenditures price growth was mostly in line, but core PCE did tick up slightly more than expected. The Federal Reserve held interest rates steady at its June meeting but hinted at two potential rate cuts later this year, maybe as soon as July or September, which is certainly boosting spirits. Yearahead inflation expectations have plummeted, which is good news. However, some analysts warn that tariffs could still push up inflation later in the year. Speaking of the economy, the US did see a 0.5% contraction in Q1 2025, the first decline in three years, mainly due to consumer spending and exports. But, Q2 GDP is looking much better, with the Atlanta Fed GDPNow estimate at a robust 4.6%. Consumer confidence was a bit shaky earlier in June, but a more recent University of Michigan report revised sentiment slightly higher, with expectations for personal finances and business conditions climbing significantly. Retail sales in the US declined in May, likely due to consumers pulling back ahead of expected tariffs, but core retail sales, excluding some volatile items, actually showed growth. Geopolitically, the IsraelIran conflict, which caused some initial market jitters and an oil price spike, has seen a ceasefire announced, and nuclear talks are set to begin, easing those immediate tensions. On the company front, Q1 corporate earnings for the S&P 500 hit new highs, up 9.6% yearoveryear. Dollar General reported betterthanexpected results and surged 16%. Nike soared over 15% despite warning about tariffs, thanks to a production shift away from China. Broadcom had strong quarterly results, though its forecast was a bit soft. Lululemon, on the other hand, plunged after trimming its fullyear outlook. In the tech world, Nvidia closed at a record high, reclaiming its spot as the world's most valuable company. ON Semiconductor soared on signs of recovering demand, and AMD surged after analyst upgrades. Microsoft is also at a new alltime high. Sadly, Intel is undergoing significant layoffs, cutting about 22,000 workers. Other notable movers include EchoStar and Coinbase Global, both gaining significantly, and Warner Bros. Discovery shares were up after announcing a split of its streaming and studios business. So, what's our analysis here? The current positive sentiment in the US stock market is primarily driven by the significant reduction in trade tensions. That confirmed USChina trade deal and the White House's flexible stance on tariff deadlines have really removed a major overhang that previously caused substantial market drops. This has allowed investors to focus on the underlying strength of corporate earnings and the prospect of more accommodative monetary policy from the Fed. While Q1 GDP showed a contraction, those forwardlooking estimates for Q2 suggest a strong rebound, and corporate earnings remain robust, providing a solid fundamental backdrop. The Federal Reserve's stance of holding rates steady while hinting at future cuts is seen as very dovish, boosting investor confidence, although that latest core PCE data might make a July cut a bit less likely. And the rebound in consumer sentiment in late June, after an earlier dip, also signals resilience in consumer expectations for the economy, despite that weaker retail sales data in May, which was heavily influenced by anticipation of tariffs. The technology sector, especially chipmakers and largecap tech, continues to lead the market, showing strong performance and innovation, particularly around AI advancements. This highlights a continued preference for growth stocks in the current environment. However, we're seeing some divergence even within the big tech names, meaning individual company fundamentals and news are still very important. The underperformance of healthcare and basic materials, alongside those mixed retail sales, suggests that not all sectors are benefiting equally from this current economic narrative. Geopolitical risks, specifically the IsraelIran conflict, caused a temporary wobble but have since deescalated, allowing the market to resume its upward trend. However, the underlying tensions and potential for future disruption definitely remain a background concern. Now, for some concrete recommendations. For our growthoriented investors, maintain exposure to Technology and Communication Services. These sectors continue to show strong momentum and innovation. Focus on companies with solid earnings growth, clear competitive advantages, and strong balance sheets. Continue to overweight positions in established tech giants like Nvidia, Microsoft, and Alphabet, which have shown resilience and growth. And explore Communication Services for potential value, especially companies like Meta Platforms, which is considered undervalued despite strong performance. Be selective in Consumer Cyclical. While the sector saw strong gains in May, largely due to Tesla, its overall valuation is nearing fair value. Focus on individual companies with strong fundamentals and unique growth drivers, like Dollar General, rather than just broad sector ETFs. For our valueoriented investors, look for opportunities in undervalued sectors. Energy and Real Estate remain significantly undervalued. Consider Energy and Real Estate ETFs, or individual companies within these sectors that have strong underlying assets and robust cash flows, as they may offer a margin of safety and potential for future recovery. Exercise caution in overvalued sectors. Consumer Defensive, Utilities, and parts of Financial Services are noted as potentially overvalued. Review your holdings in these sectors. For Consumer Defensive, be mindful of specific stocks like Costco and Walmart that are skewing valuations. For Financials, while some banks are hitting new highs, ensure you do your due diligence on individual names. For general investment strategies, monitor macroeconomic data closely. While trade tensions have eased, that slight rise in core PCE and the mixed signals from consumer sentiment and retail sales warrant attention. Pay close attention to upcoming inflation reports and Federal Reserve announcements. Be prepared to adjust your portfolio if the Fed's stance shifts or if inflation proves more persistent. And as always, diversify your portfolio. Despite the current rally in certain sectors, diversification across various sectors and asset classes remains crucial to mitigate risks. Ensure your portfolio isn't overly concentrated in just a few highperforming tech stocks. Consider a balanced approach that includes a mix of growth and value stocks. And finally, on risk management: keep an eye on geopolitical risks. While the immediate crisis in the Middle East has eased, tensions and their potential impact on oil prices and global supply chains remain a consideration. There's also some tariff uncertainty. While a deal has been signed and flexibility shown, the longerterm impact of new trade policies and the potential for renewed tensions could still introduce volatility. Analysts predict the brunt of tariff impact could hit in Q3. And of course, keep monitoring earnings season. While Q1 earnings were strong, continued robust performance is essential to sustain the rally. Monitor those Q2 earnings reports closely as they are released. In summary, the US stock market is in a strong position, buoyed by positive trade news and solid corporate performance, with expectations for potential Fed rate cuts providing further tailwinds. However, investors should remain vigilant regarding macroeconomic indicators, particularly inflation and consumer spending, and the ongoing geopolitical landscape. Strategic sector allocation and diversification are key to navigating this dynamic environment. That's all for today's Spy Trader. I'm Market Marvin, signing off. Happy trading, everyone!