Market Rally stalls as optimism peaks 06/05/2025

HOT stories for today

US market wrap:

• Wall Street’s winning streak came to a halt Monday as major indexes dipped, ending a multi-session rally driven by optimism. The S&P 500 slipped 0.6%, snapping a nine-day climb — its longest since 2004. The Nasdaq Composite, dominated by tech stocks, retreated 0.7%, while the Dow Jones Industrial Average edged down 0.2%. Lingering uncertainty over international tariffs continued to cast a shadow over investor sentiment. Treasury Secretary Scott Bessent told CNBC that negotiations were nearing completion, reinforcing President Trump’s Sunday remarks suggesting that trade deals could be finalized within days. Bloomberg, citing informed sources, reported that India is offering to eliminate duties on select goods.
• Economic data provided a mixed backdrop. The Institute for Supply Management reported stronger-than-expected growth in April’s service sector, offering a bright spot amid trade-related concerns. Meanwhile, quarterly earnings from Hims, Ford, and Palantir were released, though investor attention has shifted toward the Federal Reserve’s upcoming policy meeting, which begins Tuesday and culminates with a rate decision Wednesday afternoon.
   

Market Rally stalls as optimism peaks
 

• The stock market’s strong rally over the past month may be losing steam, say contrarian analysts, who point to a sharp rise in investor optimism as a red flag. Historically, markets perform best when climbing a “Wall of Worry” — fueled by caution and doubt. But that wall appears to be crumbling. Since rebounding from its tariff-driven correction, the S&P 500 has returned to early April levels. Yet rather than becoming more cautious, investors have grown significantly more bullish.
• The Hulbert Stock Newsletter Sentiment Index jumped 25 points between April 2 and May 2, while its Nasdaq counterpart surged 64 points. CNN’s Fear & Greed Index also climbed sharply, even surpassing levels seen at February’s peak. Contrarians argue that such exuberance, instead of skepticism, often precedes a pause or pullback — not a breakout. While a full-blown bear market isn’t expected, a short-term correction may be needed to restore balance and rebuild market momentum.
   

Stocks on the move:

• Palantir Technologies (PLTR) — Shares sank nearly 7% after the defense-focused tech firm posted first-quarter results that matched forecasts. Adjusted earnings came in at 13 cents per share, in line with LSEG estimates, while revenue reached $884 million, exceeding the expected $863 million.
• Vertex Pharmaceuticals (VRTX) — The biotech stock slipped 2% following underwhelming quarterly numbers. Adjusted earnings were $4.06 per share, missing the $4.32 estimate, with revenue at $2.77 billion versus a projected $2.85 billion, per LSEG.
• Mattel (MAT) — Shares fell 2.5% after the toymaker suspended its full-year 2025 guidance, citing tariff-related uncertainty. Nonetheless, first-quarter performance exceeded analyst projections.
• Hims & Hers Health (HIMS) — The telehealth firm edged 1% lower after its Q2 revenue forecast of $530 million to $550 million came in below FactSet’s $564.6 million consensus. Still, Q1 earnings and sales topped expectations.
• Ford Motor (F) — Shares declined 2.7% in after-hours trading as Q1 adjusted EBIT plunged to $1.02 billion from $2.76 billion year over year, according to FactSet. Ford withdrew future guidance, citing an estimated $1.5 billion tariff impact on 2025 earnings.
   

Today’s action
 

• Asian markets mostly advanced Tuesday as investors weighed trade developments between the U.S. and regional partners, alongside the recent rally in Asian currencies amid a weakening U.S. dollar. India has reportedly offered to eliminate tariffs on steel, auto parts, and pharmaceuticals on a reciprocal and limited-import basis. Meanwhile, Malaysia announced that the U.S. had agreed to resume trade discussions, potentially opening the door to tariff reductions.
• Back in the U.S., stock futures ticked lower ahead of the Federal Reserve’s two-day policy meeting — the first since President Trump introduced “reciprocal” tariffs in early April. Futures tied to the S&P 500 slipped just under 0.2%, Dow futures edged down 26 points, and Nasdaq-100 futures declined 0.35%. Investors are also eyeing the U.S. March trade deficit data due Tuesday, along with key earnings reports from DoorDash (DASH), Advanced Micro Devices (AMD), and Super Micro Computer (SMCI).

Watchlist: PLTR, HIMS, DASH, AMD, SMCI, MAT, VRTX, F, AAPL

Bitcoin
 

• Bitcoin (BTC) retreated to $94,000 on Monday as the broader cryptocurrency market declined 1.06%, bringing total market capitalization to $2.93 trillion, according to CoinMarketCap. Seven of the top ten digital assets traded in the red. The pullback follows a sharp rally last week, when BTC surged to nearly $97,906 after stronger-than-expected U.S. jobs data.
• While equity markets were largely flat, gold jumped 2.38% to $3,320.60 per ounce, reflecting heightened demand for safe-haven assets. Market sentiment remains clouded by economic uncertainty stemming from President Trump’s aggressive tariff policy, which has driven some investors to non-U.S. stores of value like gold and bitcoin. Despite Monday’s dip, Bitcoin still commands close to 65% of the total crypto market.
  Watchlist: Bitcoin: 74 000-100 000, Ethereum:1500-2800, Solana: 80-180
   

Forex
 

• The Japanese Yen (JPY) slipped modestly against the U.S. dollar in early Tuesday trading, though the decline lacked momentum. Despite the Bank of Japan’s dovish stance last week, sticky inflation and rising wage expectations in Japan are keeping speculation of future tightening alive. Safe-haven flows driven by geopolitical tensions and uncertainty around President Trump’s trade policy continue to limit the yen’s downside. Diverging monetary paths between the BoJ and the Fed are also keeping a lid on USD/JPY gains ahead of the Federal Reserve’s policy meeting.
• Meanwhile, the euro struggled for direction against the dollar. EUR/USD rebounded from the 1.1275 area to hit a session high, but remains range-bound near recent lows. A break below the 100-period SMA on the 4-hour chart hints at bearish pressure, though mixed technical signals have traders staying cautious as they await Wednesday’s FOMC rate decision.
  Watchlist: EUR/USD: 1.0700-1.1600, USD/JPY: 140-144

Basic Materials
 

• Gold (XAU/USD) extended its upward momentum for a second straight day Tuesday, buoyed by safe-haven flows amid persistent geopolitical tensions. The precious metal briefly touched a two-week high during the Asian session before easing slightly. Weak demand for the U.S. dollar also supported gold prices ahead of the Federal Reserve’s closely watched policy meeting. While signs of cooling U.S.-China trade friction emerged, President Trump’s unpredictable tariff stance and ongoing conflicts in Ukraine and the Middle East continued to stoke investor caution.
• Meanwhile, West Texas Intermediate (WTI) crude traded around $57.60 per barrel, rebounding from Monday’s nearly 2% drop. Prices were supported by OPEC+’s pledge to boost output by 411,000 barrels per day in June. Still, gains were limited by fears of a global economic slowdown and tepid demand for refined fuel imports.
  Watchlist: GOLD 2600-3500, US Oil: 55.60-70.00
   

Key Economic Events Today:

EST time
08:30 am: USD Trade Balance
01:01 pm: USD 10-y Bond Auction
 

Earnings

BMO (Before the US Market opens)
RACE            Ferrari N.V.
DUK              Duke Energy Corp.
DDOG           Datadog Inc.
CEG              Constellation Energy Corp.
ZTS               Zoetis Inc.
AMC (After the US Market closes): AMD, ANET, SMCI,
 

The TEFS Analyst team wishes you a successful day!