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Yahoo
16-05-2025
- Business
- Yahoo
Analysis-US stock market gains may slow after torrid rebound from tariff swoon
By Lewis Krauskopf NEW YORK (Reuters) -Market momentum following the U.S.-China trade truce has put stocks back in sight of record highs but wariness about the economic fallout from remaining tariffs and higher equity valuations could slow gains in the near term. The S&P 500 has soared 18% since hitting its low closing point for the year on April 8, erasing the benchmark index's losses for 2025 and putting it roughly 4% from its all-time peak reached in February. However, the S&P 500's price-to-earnings ratio has hit a two-month high while 2025 profit growth estimates have fallen since the start of the year. While U.S. tariffs seem less harsh than before, the import levies still could pressure corporate profits and consumer spending, causing unease about the economy, investors said. "Momentum is very strong, so it could carry markets up here," said Anthony Saglimbene, chief market strategist at Ameriprise Financial. "But I think for markets to maintain those levels it is going to be difficult because the environment is still uncertain." For now, fears of worst-case trade scenarios causing a recession are waning. The relief has fueled the market rebound after U.S. President Donald Trump's April 2 announcement of sweeping global tariffs set off dramatic volatility and sent stocks swooning. Equities got an extra kick higher this week from a 90-day U.S.-China truce reached over the weekend that slashed tariffs from over 100% on both sides, and cooled off a trade war between the world's two largest economies. The overall effective U.S. tariff on imports is down to 14% from 24% previously, according to JPMorgan economist Michael Feroli, but still above the rate of 2.3% in 2024. "The new, lower tariff rates are still a boost to inflation, and hence a depressant on real disposable income and real consumer spending," Feroli said in a note on Tuesday. With first-quarter earnings season winding down, U.S. companies have so far reported earnings well above expectations. However, analysts have trimmed full-year earnings estimates to a gain of 8.7% instead of 14% at the start of the year, according to LSEG IBES. "We've seen valuations make a roundtrip while earnings estimates have come down, so further gains are going to be harder to come by" in the short term, said Angelo Kourkafas, senior investment strategist at Edward Jones. The forward price-to-earnings ratio for the S&P 500, based on earnings estimates for the next 12 months, this week rose above 21 for the first time since early March, according to LSEG Datastream. That P/E ratio is well above the index's long-term average of 15.8 and a sharp rise from the 17.9 level it fell to at the market lows in April. "With the scope of this massive rally now, I don't know that I would chase the stock market here," said Chris Galipeau, senior market strategist at Franklin Templeton. "The risk/reward right now is not as good." Noting the market's strong rebound, UBS Global Wealth Management strategists on Tuesday downgraded U.S. equities to "neutral" from "attractive." "The economy will have to adjust to higher tariffs, and this could lead to a period of weaker economic data, which could be a modest headwind for stocks," UBS said in a note. However, some investors have turned more upbeat about stocks and the economy since the U.S.-China truce. Strategists at Goldman Sachs and Yardeni Research raised their targets this week for the S&P 500, with Yardeni eyeing 6,500 at year-end, about 10% above current levels. Odds of a U.S. recession in 2025 have fallen on online prediction market Polymarket to about 40% from 66% at the start of May. Resilient economic data have supported the rally, but upcoming reports could get more "squirrelly" as the impact of tariffs starts to become more evident, said King Lip, chief strategist at BakerAvenue Wealth Management. "In the short term, (the rally) seems a little extended," Lip said. "It seems like people believe maybe they got the all clear signal, and I'm not sure it's all clear." Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Reuters
16-05-2025
- Business
- Reuters
US stock market gains may slow after torrid rebound from tariff swoon
NEW YORK, May 16 (Reuters) - Market momentum following the U.S.-China trade truce has put stocks back in sight of record highs but wariness about the economic fallout from remaining tariffs and higher equity valuations could slow gains in the near term. The S&P 500 (.SPX), opens new tab has soared 18% since hitting its low closing point for the year on April 8, erasing the benchmark index's losses for 2025 and putting it roughly 4% from its all-time peak reached in February. However, the S&P 500's price-to-earnings ratio has hit a two-month high while 2025 profit growth estimates have fallen since the start of the year. While U.S. tariffs seem less harsh than before, the import levies still could pressure corporate profits and consumer spending, causing unease about the economy, investors said. "Momentum is very strong, so it could carry markets up here," said Anthony Saglimbene, chief market strategist at Ameriprise Financial. "But I think for markets to maintain those levels it is going to be difficult because the environment is still uncertain." For now, fears of worst-case trade scenarios causing a recession are waning. The relief has fueled the market rebound after U.S. President Donald Trump's April 2 announcement of sweeping global tariffs set off dramatic volatility and sent stocks swooning. Equities got an extra kick higher this week from a 90-day U.S.-China truce reached over the weekend that slashed tariffs from over 100% on both sides, and cooled off a trade war between the world's two largest economies. The overall effective U.S. tariff on imports is down to 14% from 24% previously, according to JPMorgan economist Michael Feroli, but still above the rate of 2.3% in 2024. "The new, lower tariff rates are still a boost to inflation, and hence a depressant on real disposable income and real consumer spending," Feroli said in a note on Tuesday. With first-quarter earnings season winding down, U.S. companies have so far reported earnings well above expectations. However, analysts have trimmed full-year earnings estimates to a gain of 8.7% instead of 14% at the start of the year, according to LSEG IBES. "We've seen valuations make a roundtrip while earnings estimates have come down, so further gains are going to be harder to come by" in the short term, said Angelo Kourkafas, senior investment strategist at Edward Jones. The forward price-to-earnings ratio for the S&P 500, based on earnings estimates for the next 12 months, this week rose above 21 for the first time since early March, according to LSEG Datastream. That P/E ratio is well above the index's long-term average of 15.8 and a sharp rise from the 17.9 level it fell to at the market lows in April. "With the scope of this massive rally now, I don't know that I would chase the stock market here," said Chris Galipeau, senior market strategist at Franklin Templeton. "The risk/reward right now is not as good." Noting the market's strong rebound, UBS Global Wealth Management strategists on Tuesday downgraded U.S. equities to "neutral" from "attractive." "The economy will have to adjust to higher tariffs, and this could lead to a period of weaker economic data, which could be a modest headwind for stocks," UBS said in a note. However, some investors have turned more upbeat about stocks and the economy since the U.S.-China truce. Strategists at Goldman Sachs and Yardeni Research raised their targets this week for the S&P 500, with Yardeni eyeing 6,500 at year-end, about 10% above current levels. Odds of a U.S. recession in 2025 have fallen on online prediction market Polymarket to about 40% from 66% at the start of May. Resilient economic data have supported the rally, but upcoming reports could get more "squirrelly" as the impact of tariffs starts to become more evident, said King Lip, chief strategist at BakerAvenue Wealth Management. "In the short term, (the rally) seems a little extended," Lip said. "It seems like people believe maybe they got the all clear signal, and I'm not sure it's all clear."
Yahoo
16-05-2025
- Business
- Yahoo
Analysis-US stock market gains may slow after torrid rebound from tariff swoon
By Lewis Krauskopf NEW YORK (Reuters) -Market momentum following the U.S.-China trade truce has put stocks back in sight of record highs but wariness about the economic fallout from remaining tariffs and higher equity valuations could slow gains in the near term. The S&P 500 has soared 18% since hitting its low closing point for the year on April 8, erasing the benchmark index's losses for 2025 and putting it roughly 4% from its all-time peak reached in February. However, the S&P 500's price-to-earnings ratio has hit a two-month high while 2025 profit growth estimates have fallen since the start of the year. While U.S. tariffs seem less harsh than before, the import levies still could pressure corporate profits and consumer spending, causing unease about the economy, investors said. "Momentum is very strong, so it could carry markets up here," said Anthony Saglimbene, chief market strategist at Ameriprise Financial. "But I think for markets to maintain those levels it is going to be difficult because the environment is still uncertain." For now, fears of worst-case trade scenarios causing a recession are waning. The relief has fueled the market rebound after U.S. President Donald Trump's April 2 announcement of sweeping global tariffs set off dramatic volatility and sent stocks swooning. Equities got an extra kick higher this week from a 90-day U.S.-China truce reached over the weekend that slashed tariffs from over 100% on both sides, and cooled off a trade war between the world's two largest economies. The overall effective U.S. tariff on imports is down to 14% from 24% previously, according to JPMorgan economist Michael Feroli, but still above the rate of 2.3% in 2024. "The new, lower tariff rates are still a boost to inflation, and hence a depressant on real disposable income and real consumer spending," Feroli said in a note on Tuesday. With first-quarter earnings season winding down, U.S. companies have so far reported earnings well above expectations. However, analysts have trimmed full-year earnings estimates to a gain of 8.7% instead of 14% at the start of the year, according to LSEG IBES. "We've seen valuations make a roundtrip while earnings estimates have come down, so further gains are going to be harder to come by" in the short term, said Angelo Kourkafas, senior investment strategist at Edward Jones. The forward price-to-earnings ratio for the S&P 500, based on earnings estimates for the next 12 months, this week rose above 21 for the first time since early March, according to LSEG Datastream. That P/E ratio is well above the index's long-term average of 15.8 and a sharp rise from the 17.9 level it fell to at the market lows in April. "With the scope of this massive rally now, I don't know that I would chase the stock market here," said Chris Galipeau, senior market strategist at Franklin Templeton. "The risk/reward right now is not as good." Noting the market's strong rebound, UBS Global Wealth Management strategists on Tuesday downgraded U.S. equities to "neutral" from "attractive." "The economy will have to adjust to higher tariffs, and this could lead to a period of weaker economic data, which could be a modest headwind for stocks," UBS said in a note. However, some investors have turned more upbeat about stocks and the economy since the U.S.-China truce. Strategists at Goldman Sachs and Yardeni Research raised their targets this week for the S&P 500, with Yardeni eyeing 6,500 at year-end, about 10% above current levels. Odds of a U.S. recession in 2025 have fallen on online prediction market Polymarket to about 40% from 66% at the start of May. Resilient economic data have supported the rally, but upcoming reports could get more "squirrelly" as the impact of tariffs starts to become more evident, said King Lip, chief strategist at BakerAvenue Wealth Management. "In the short term, (the rally) seems a little extended," Lip said. "It seems like people believe maybe they got the all clear signal, and I'm not sure it's all clear." Sign in to access your portfolio
Reuters
02-05-2025
- Business
- Reuters
Wall St Week Ahead Fed outlook in focus as US stocks rally picks up steam
NEW YORK, May 2 (Reuters) - The Federal Reserve meeting in the coming week is set to test the U.S. stock market's sharp rebound, with investors hoping the central bank is poised to resume lowering interest rates in the months ahead. During the rally, stocks have nearly erased the slump set off by President Donald Trump's sweeping tariffs. The S&P 500 (.SPX), opens new tab was last down roughly 1% since April 2, when Trump's "Liberation Day" tariff announcement sent stocks plunging and led to some of the market's most volatile swings in 50 years. While the Fed is widely projected to hold borrowing costs steady when it gives its monetary policy statement on Wednesday, market pricing indicates expectations that the central bank could cut as soon as June. "The Fed is one of the few levers that can be pulled in a timely fashion that can support market activity," said Dominic Pappalardo, chief multi-asset strategist at Morningstar Wealth. "If they start to signal that their inflation concerns are waning, that suggests they are closer to a cut, and I think that will be well received by markets." Trump's tariffs loom over policy decisions for central bank officials weighing concerns about a potential economic downturn against worries that tariffs will drive inflation higher. Data this week showed the U.S. economy contracted in the first quarter for the first time since 2022, but many analysts discounted the report, saying the weakness was driven by a surge in imports as businesses sought to avoid higher costs from tariffs. After cutting by 1 percentage point last year, the Fed has held its benchmark rate at 4.25%-4.5% so far in 2025. Fed funds futures are factoring in nearly four more 25-basis point cuts by December, according to LSEG data. The White House has raised pressure on the central bank to cut rates, with Trump harshly criticizing Fed Chair Jerome Powell, who has said the Fed would await more data on the economy's direction before changing rates. Last month, Trump raised the possibility he would seek to fire Powell, setting off market worries about damage to the Fed's independence. Trump later appeared to back off. At next week's meeting, Powell "might continue to sound hawkish to push back on the narrative that the Fed is going to be influenced by the White House," said Angelo Kourkafas, senior investment strategist at Edward Jones. Even after eight straight sessions of gains, the S&P 500 remains down about 9% from its February record high. Last month, the benchmark index dropped nearly 20% below that peak. Corporate results reports over the past few weeks have generally exceeded expectations. With about two-thirds of the S&P 500 having reported, companies in aggregate are posting earnings 7.4% above expectations versus a long-term average of 4.3% above estimates, according to LSEG IBES. Shares of megacaps Microsoft (MSFT.O), opens new tab and Facebook parent Meta Platforms (META.O), opens new tab gained on Thursday after their results, boosting equity indexes. Results in the coming week include Uber Technologies (UBER.N), opens new tab, Walt Disney (DIS.N), opens new tab and ConocoPhillips (COP.N), opens new tab. Trade developments will remain in focus, with investors saying the market's rebound came on optimism that tensions were easing and that deals with other countries were progressing. Trump on April 9 paused hefty import levies on many countries for 90 days, as the U.S. negotiates with other countries. That move sent stocks soaring. "The market wants to see, and expects to see, some solid signed deals with some of our trading partners," said Scott Wren, senior global market strategist at the Wells Fargo Investment Institute. "The market is anticipating something, and it's time for the rubber to hit the road."
