Wall Street ended Monday in the green, with all three major indexes rising even as Donald Trump, now back in the White House, hiked tariffs on imported steel and aluminum.
The S&P 500 closed at 5,935.94, climbing 0.4%, while the Nasdaq Composite jumped 0.7% to settle at 19,242.61. The Dow Jones Industrial Average edged up 0.08% to 42,305.48, officially crossing into bull market territory — that’s a 20% rally from its recent bottom.
The move higher happened even as Trump’s new tariff decision stirred more friction between Washington and key trading partners. Despite the renewed tension, investors remained upbeat, betting that trade talks won’t completely collapse.
But that optimism didn’t carry into Tuesday. Futures took a hit before markets even opened. By morning, S&P futures were down 0.39%, the Dow’s were off by 159 points, and the Nasdaq 100 slipped 0.37%.
JPMorgan flags stretched prices and fading momentum
Mislav Matejka, strategist at JPMorgan, said in a client note that the bounce since early April was driven more by mechanics than fundamentals. He pointed to “short covering” and “systematic re-risking” as the primary fuel behind the rally, but warned that these forces are “no longer in play.”
He added, “Positioning is not cautious anymore.” Mislav also pointed out that current stock valuations are stretched and that future gains — if they come — will depend more on real-world economic performance.
His team now expects slower economic growth and a likely uptick in consumer prices, which he says could be “payback for frontloading of orders” that companies rushed before tariffs hit. That scenario, he warned, could trigger a new round of stagflation fears — where inflation rises even as the economy cools off.
The S&P 500 hasn’t posted a new high since February, and Mislav believes investors may be ignoring the lingering effects of tariffs still in place. While the full 20–25% rates floated last year never took effect, the current average tariff level is around 12%. That’s still a sharp jump from pre-Trump levels.
Northwestern Mutual sees risks in jobs and spending
Matt Stucky, who runs equities at Northwestern Mutual Wealth, said that even though markets aren’t flashing signs of a crash, there’s room for a mild pullback. “The downside risk for the market is probably more of a ‘run-of-the-mill’ correction unless the unemployment rate starts to climb,” Matt said. One of the last strongholds in the economy is consumer spending, which he said is still supporting stocks — for now.
That might change soon. “We’ll see how consumers actually react to higher prices when they arrive later this month and into the summer,” Matt added. And those higher prices could be hitting at a time when US factories are already under pressure.
A new report from the Institute for Supply Management showed that manufacturing activity shrank in May for the third straight month. Not only that, but suppliers are taking longer to deliver goods — a sign that tariffs are starting to choke supply chains.
Meanwhile, the Federal Reserve still hasn’t acted. But Lorie Logan, President of the Dallas Fed, said they’re keeping watch. Inflation, she noted, is “somewhat above target,” and while the job market is still steady, the overall picture is too uncertain to make a call.
Traders are now expecting the Fed to cut interest rates twice before the year ends, each time by 25 basis points, based on current market pricing. Tech names helped drive Monday’s rally. Nvidia climbed 1.7%, and Meta jumped 3.6%. But not all the big names held up.
Tesla dipped 1.1% after its latest monthly sales numbers came in lower for Portugal, Denmark, and Sweden. That dragged on the stock despite broader strength in tech.
Investors now have their eyes locked on this Friday’s nonfarm payrolls report, which will give the next read on how solid the labor market really is. The outcome could change expectations for rates, trade decisions, and Wall Street’s direction moving into summer.
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This articles is written by : Nermeen Nabil Khear Abdelmalak
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