Stock Market Rally Driven by Trade Talks and Key Earnings This Week

Last week, U.S. stocks surged notably, with the S&P 500 rising 5.3%, the Nasdaq Composite jumping 7.2%, and the Dow Jones Industrial Average gaining about 3.4%. Both the S&P 500 and Nasdaq have now fully recovered from the tariff-related downturn seen in early April, putting them comfortably in positive territory for the year.

Trade headlines will continue to dominate the market narrative this week, amid a light economic calendar. Key reports will include updates on manufacturing activity and weekly unemployment claims, but otherwise few major data releases are expected.

With the majority of companies having reported first-quarter earnings, market focus will narrow on results from key players like Palo Alto Networks, Target, Home Depot, and Workday.

Trade War Status

The ongoing trade dispute remains the market’s top story. Last week’s announcement of a 90-day tariff suspension with China sparked a rally across stocks, prompting some Wall Street strategists to raise their outlooks on the S&P 500. President Trump also indicated that tariff rates for other trading partners will be announced in the coming weeks.

Tom Lee, head of research at Fundstrat, remains optimistic. In a recent client note defending his S&P 500 year-end target of 6,500, he said that if formal tariff agreements are soon reached, equities could see further gains. However, many experts emphasize that the tariff pause is temporary and that negotiations are ongoing, leaving some policy uncertainty in place.

Victoria Fernandez, chief market strategist at Crossmark Global Investments, advised investors to stay cautious until firm trade agreements are secured—not only with China but also with Europe, where talks remain in the background.

Federal Reserve and Interest Rate

Economists have generally lowered recession risks over the past week, supported by the tariff pause. This shift has influenced expectations for Federal Reserve interest rate decisions. Market odds now favor a rate cut in July rather than June, according to CME’s FedWatch Tool. Bloomberg data shows that the market is pricing in two quarter-point rate cuts for the full year, down from three cuts anticipated just last week.

The week ahead will feature nine speeches from Federal Reserve officials, but analysts like Bank of America’s Aditya Bhave predict these talks will likely reinforce the Fed’s wait-and-see stance. Bhave expects Fed officials to stress patience and caution due to ongoing uncertainties, particularly around trade policy.

Bhave also holds a contrarian view that the Fed may not cut rates at all this year unless there is clear evidence of significant labor market deterioration or inflation easing beyond tariff effects—scenarios he believes are unlikely in the near term.

Despite the pushback in rate cut expectations, the market has remained resilient as investors continue to pour money into risk assets amid a brighter outlook for economic growth.

The Mixed Role of Big Tech Stocks

After powering the S&P 500’s gains for two straight years, the “Magnificent Seven” tech giants—Apple, Alphabet, Microsoft, Amazon, Meta, Tesla, and Nvidia—have weighed on the index in 2025. Research by DataTrek co-founder Nicholas Colas showed that this group accounted for all of the S&P 500’s decline during the first quarter. In fact, excluding these stocks, the index would be up about 2% so far this year.

However, the picture has shifted since May. These seven tech stocks have driven 60% of the S&P 500’s gains in the current month, led by strong rallies in Nvidia, Microsoft, and Tesla. Tesla and Nvidia have surged roughly 30% or more in the past month, while Microsoft has gained about 20%.

In response to this tech rebound, Goldman Sachs lifted its year-end S&P 500 target from 5,900 to 6,100, citing optimism about AI-driven earnings growth and attractive valuations in the sector.

Weekly Economic and Earnings Calendar

Monday

• Economic Data: Leading Index, April (expected -0.8%)

• Earnings: Trip.com (TCOM)

Tuesday

• Economic Data: Philadelphia Fed Non-Manufacturing Activity, May

• Earnings: Home Depot (HD), Palo Alto Networks (PANW), Toll Brothers (TOL)

Wednesday

• Economic Data: MBA Mortgage Applications (May 16)

• Earnings: Baidu (BIDU), Canada Goose (GOOS), Snowflake (SNOW), Target (TGT), TJX Companies (TJX), Urban Outfitters (URBN), VF Corporation (VFC), Zoom (ZM)

Thursday

• Economic Data: Chicago Fed National Activity Index, Initial Jobless Claims, Continuing Claims, S&P Global US Manufacturing and Services PMIs, Existing Home Sales, Kansas City Fed Manufacturing Activity

• Earnings: Advance Auto Parts (AAP), Autodesk (ADSK), BJ’s (BJ), Deckers (DECK), Intuit (INTU), Ralph Lauren (RL), Ross Stores (ROST), TD Bank (TD), Workday (WDAY)

Friday

• Economic Data: New Home Sales and Building Permits, April

• Earnings: No major reports

This week, investors will keep a close watch on trade negotiations and key earnings reports, as ongoing policy uncertainties and the Federal Reserve’s cautious stance continue to shape market behavior.

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