Tariff Twist Lifts Stocks, But an Appeal Looms Large Over Markets
Tariff Twist Lifts Stocks, But an Appeal Looms Large Over Markets
By:JJ Kinahan
Meanwhile, mixed earnings reports paint a split picture for the tech and retail sectors
- A court paused the tariffs and thus boosted stocks.
- But a subsequent ruling and the likelihood of appeal are feeding uncertainty.
- Meanwhile, earnings reports have been mixed: Dell and Ulta surged while Marvell and Gap fell on tariff concerns.
- All eyes are on PCE data, consumer sentiment and the VIX for clues on the market volatility ahead.
Stocks were poised to rally yesterday morning after a court ruling placed most of President Trump’s tariffs on hold. However, any hopes of clarity were quickly clouded as the administration responded by seeking an injunction against the decision and indicated plans to appeal.
Despite the legal tug-of-war over trade policy, equity markets managed to post modest gains. The S&P 500 and Nasdaq both rose 0.4%, while the Dow Jones Industrial Average and Russell 2000 added 0.3%.
Earnings reports roll into view
After the closing bell, earnings reports rolled in from both the tech and retail sectors. Dell Technologies (DELL) missed earnings expectations but beat on revenue, and its strong forward guidance pushed the stock up nearly 2% in after-hours trading.
Conversely, Marvell Technology (MRVL) fell over 3% post-close, even after beating earnings estimates and delivering in-line guidance, showing how fragile investor sentiment remains.
In the retail world, Gap (GAP) had a particularly tough day. Shares dropped 15% after management, despite posting a solid quarter, warned that tariffs could cost the company between $250 to $300 million if not addressed.
However, Ulta Beauty (ULTA) bucked that trend. The company beat earnings expectations and raised guidance, sending shares up nearly 8.5%.
These divergent outcomes highlight how sensitive retail stocks remain to ongoing developments in tariffs and trade policy.
As earnings season draws to a close, the central question becomes what lies ahead for tariffs and how markets will respond. If the Trump administration fails in its appeal and the ruling halting tariffs stands, there may be reason for optimism in the markets. Until then, however, we could see stocks move sideways as uncertainty lingers.
Economic data on the horizon
On the economic front, investors are eyeing the release of April’s personal consumption expenditures (PCE) index. Expectations are for a modest 0.1% increase in core prices. While the PCE has traditionally been a key data point for the Federal Reserve, its relevance may be overshadowed by the uncertainty around tariffs.
In contrast, consumer sentiment could offer more immediate insight into market direction. The Michigan Consumer Expectations reports are due, offering a glimpse into how households are feeling amid the trade tensions.
As we head into the day, the focus of the markets will likely center on how this data is absorbed. Meanwhile, the VIX remains elevated, signaling underlying caution. A move back toward 16 could suggest we’re exiting the recent bout of volatility.
Until then, staying disciplined with your long-term investment strategy remains the best course.
JJ Kinahan is CEO of tastytrade from IG—which includes tastylive, tastyfx and tastycrypto. Kinahan traded for 21 years at the Chicago Board Options Exchange. He serves on the CBOE Advisory Board and the SIFMA Options Committee. @thejjkinahan
For live daily programming, market news and commentary, visit tastylive or the YouTube channels tastylive (for options traders), and tastyliveTrending for stocks, futures, forex & macro.
Trade with a better broker, open a tastytrade account today. tastylive, Inc. and tastytrade, Inc. are separate but affiliated companies.
Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.