Trade talks will be key next week for a market striving to leave tariff turmoil behind

CNBC

02-05-2025

Trade talks will continue to be critical in the week ahead, as equities mount an impressive rally on hopes the U.S. economy is strong enough to weather the fallout from Trump's tariffs. The S & P 500 has made a huge comeback since the post-April 2 sell-off, recouping all its losses after the latest jobs report spurred hopes the U.S. could dodge a recession, and China reportedly signaled a willingness to come to the table on trade talks. On Friday, the S & P 500 was on pace for its longest win streak since 2004. It is trading above its 50-day moving average for the first time in two months. Now, investors are hoping that any sign of progress with any of the U.S.'s key trading partners will mean that stocks have finally turned a corner, and even may have put in a bottom, after pricing in the worst of Trump's initial tariffs. "Making most of April 2 go away is what I think investors are waiting for," said Art Hogan, chief market strategist at B. Riley Wealth Management. "I think the stock market would settle for one major deal with a major trade partner to kind of set the table for the potential for more. We're about halfway through that 90-day window, and, really, I think investors would react positively to getting that first deal on the tape." .SPX 3M mountain S & P 500 China, of course, could take longer to negotiate with, Hogan said. However, a trade agreement with other key countries including Mexico, Canada, Japan or the Eurozone that sets the precedent for future deals could also have a euphoric effect on the stock market. "I certainly feel as though that would be monumental," Hogan said. The technical setup Still, there are reasons to be concerned. In spite of Friday's surprisingly strong jobs report, many investors are sure the U.S. is headed for a slowdown, even if it can manage to skirt a recession. The long-term technical trend remains troubling as well. While the S & P 500 may have broken above key near-term resistance, trading above its 50-day moving average, it still has to surmount long-term resistance at its 200-day. The broader index was last at around 5,694. Fairlead Strategies founder Katie Stockton said she sees the next resistance level for the S & P 500 at 5,783, where it traded the day of the November election, and added that the longer-term trends remain weak. "We did see a breakdown that was more significant than the short-term breakout," said Stockton. "I call it a round trip — despite the recent bounce, the damage to the charts has been done." Elsewhere, Wolfe Research's Rob Ginsberg noted a sharp reversal in the S & P 500 could bring the benchmark back down to support at 5,200. Fed meeting, peak earnings Federal Reserve policymakers are scheduled to meet next week. Many investors are certain that the central bank will be on hold for the time being as the economy continues to show signs of strength, and inflation remains elevated. Investors have dialed back their rate cut expectations, with markets last pricing in three quarter-point reductions in 2025, down from four prior to Friday's jobs report, according to the CME FedWatch Tool . The first rate cut has been pushed back to July, instead of June. Next week is the final peak of earnings season, with another fifth of S & P 500 companies posting quarterly results, including Dow component Walt Disney . Thus far, the first-quarter reporting season has come in stronger than expected, but current-quarter estimates have come down. On Friday, stocks were on pace to close out the week with strong gains. The Dow Jones Industrial Average was up nearly 3% in the period, as was the S & P 500. The Nasdaq Composite has risen more than 3%. Week ahead calendar All times ET. Monday, May 5 9:45 a.m. PMI Composite final (April) 9:45 a.m. S & P PMI Services final (April) 10 a.m. ISM Services PMI (April) Earnings: Clorox , Palantir Technologies , Ford Motor , Vertex Pharmaceuticals , Diamondback Energy , Coterra Energy , Zimmer Biomet , Loews , Tyson Foods , ON Semiconductor Tuesday, May 6 8:30 a.m. Trade Balance (March) Earnings: Arista Networks , Wynn Resorts , Electronic Arts , Devon Energy , Advanced Micro Devices , TransDigm Group , Marriott International , IQVIA Holdings , Fastenal , Duke Energy , American Electric Power , Gartner , Marathon Petroleum , Global Payments , Fidelity National Information Services , Constellation Energy , Archer-Daniels-Midland Wednesday, May 7 2 p.m. FOMC Meeting 2 p.m. Fed Funds Target Upper Bound 3 p.m. Consumer Credit SA Earnings: Paycom Software , Fortinet , Skyworks Solutions , Axon Enterprise , Occidental Petroleum , DoorDash , Corteva , CF Industries Holdings , Rockwell Automation , Uber Technologies , Emerson Electric , Walt Disney Thursday, May 8 8:30 a.m. Continuing Jobless Claims (04/26) 8:30 a.m. Initial Claims (05/03) 8:30 a.m. Unit Labor Costs preliminary (Q1) 8:30 a.m. Productivity preliminary (Q1) 10 a.m. Wholesale Inventories final (March) Earnings: Expedia Group , Insulet , TKO Group Holdings , Paramount Global , Microchip Technology , Akamai Technologies , Warner Bros. Discovery , ConocoPhillips , Tapestry , Molson Coors Beverage , Match Group Friday, May 9 8:30 a.m. New York Federal Reserve Bank President and CEO John Williams speaks on Taylor Rules in Policy, Stanford University 10 a.m. New York Federal Reserve Bank Director of Research and Head of the Statistics Group Kartik Athreya speaks on NY State Large Credit Unions CEO Roundtable 10:15 a.m. New York Federal Reserve Bank President and CEO John Williams speaks on Reykjavik Economic Conference, Iceland — CNBC's Hakyung Kim contributed to this report.