The shift in the Trump administration’s policy narrative weighed on stocks as the situation became more complicated since the 90-day suspension of reciprocal tariffs was announced on April 9.
Last week, the S&P 500 ( ^GSPC ) fell about 1.5%, while the Nasdaq Composite ( ^IXIC ) and the Dow Jones Industrial Average ( ^DJI ) each fell about 2.6% over four trading sessions.
President Trump’s policies will remain in focus in the coming week, while a slew of S&P 500 companies are expected to report quarterly results.
Earnings from Alphabet ( GOOGL, GOOG ), Tesla ( TSLA ), Chipotle ( CMG ), Boeing ( BA ) and Verizon ( VZ ) will lead the market this week, with more than 120 S&P 500 companies expected to report quarterly results this week.
Economic data is expected to be quiet this week, with a focus on manufacturing and services activity as well as consumer confidence data.
Uncertainty drives markets
Trump’s policies remain at the forefront of the market narrative.
Markets sold off sharply on Wednesday as investors began to see the costs Trump’s tariffs will impose on large companies and the challenges these policies could pose to the overall U.S. economic outlook.
The sell-off was sparked by Nvidia (NVDA), which revealed late Tuesday night that new U.S. government restrictions on its chip exports to China would result in a $5.5 billion loss.
The downward move only intensified when Federal Reserve Chairman Jerome Powell said in a speech that the central bank would wait for “clearer” information before considering any interest rate adjustments.
“It comes down to the continued uncertainty in the market,” Sylvia Jablonski, CEO and chief investment officer of Defiance ETFs, told Yahoo Finance.
In the short term, strategists are not convinced that the path ahead will become clearer. Stuart Kaiser, head of U.S. equity trading strategy at Citi, told Yahoo Finance that the next few weeks will be critical to the direction of the market throughout the summer.
“We need to see some good news on tariffs, especially from our major trading partners,” Keiser said.
“If the market understands that, I think the market will say, OK, here’s the strategy for how things are going to play out over the next three months,” he added. “If the market doesn’t understand that, I think the market is going to have to really start raising the odds of a recession because they think these tariffs are going to be higher than expected and longer than expected.”
Earnings Scorecard
Only 12% of S&P 500 companies have reported first-quarter results so far, but the early sample is weaker than average.
Seventy-one percent of S&P 500 companies have reported earnings per share above Wall Street expectations, below the five-year average of 77%, according to FactSet. And the margin of those beating estimates has also been lower than in previous years.
Early in the earnings season, companies have beaten analyst expectations by 6.1%, below the five-year average of 8.8%.
With more than 20% of S&P 500 companies reporting results in the coming week, investors will get a better idea of how these trends will hold, improve or deteriorate further.
“Ultimately, the importance of the first quarter reporting period will be what it tells us about what is being priced into individual stocks’ share prices as executives begin to provide some context on tariffs,” Scott Chronert, U.S. equity strategist at Citi, wrote in a note to clients Thursday.
Alphabet and Tesla kick off the reporting period for the “Big Seven” tech stocks, which have driven the market higher in 2023 and 2024.
So far this year, the trade has soured. Alphabet shares have fallen nearly 20% as 2025 begins, while Tesla shares are down more than 40%.
Market ‘downside’ risk
Despite recent market volatility, the S&P 500 is up about 6% from its lowest close of the year on April 8.
Still, many Wall Street strategists aren’t convinced the market’s next move in the near term is higher.
Keith Lerner, co-chief investment officer of Truist, wrote in a note to clients Thursday that he downgraded his view on U.S. stocks from “neutral” to “less attractive,” essentially advising investors to consider reducing their allocation to U.S. stocks relative to their typical allocation.
Lerner pointed to weakening economic growth prospects as a key factor in the bleak outlook for stocks. “When we consider the historical, fundamental and technical analysis together, the evidence is overwhelming that a slightly more defensive stance is warranted,” Lerner said.
The consensus forecast for U.S. gross domestic product to continue to decline through 2025.
But now, with President Trump’s tariffs fueling recession fears, strategists are starting to wonder if consensus growth expectations have fallen low enough.
“I’m not sure the stock market has fully priced in a recession,” Callie Cox, chief market strategist at Ritholtz Wealth Management, told Yahoo Finance.
