Tech rally hits sixth day - but after-hours earnings reveal critical economic cracks.
The market's remarkable six-day winning streak has caught many investors by surprise following President Trump's April 2 tariff announcements. While commerce secretary Howard Lutnick hints at an imminent trade deal and India negotiations are "coming along great," Wall Street strategists are sending mixed signals about what happens next.
Just as the markets celebrate this recovery, after-hours earnings paint a troubling picture: Snap plunged 13%, Starbucks dropped 7%, and Super Micro Computer fell 16%. The stark contrast between the daytime rally and after-hours selloff suggests we're at a critical inflection point—with consumer confidence now at pandemic-era lows and inflation expectations surging to 7%. What's really happening beneath the surface?
U.S. stocks extended their winning streak on Tuesday, with the Dow Jones Industrial Average posting its sixth consecutive positive session—its longest run of gains since July. The S&P 500 also notched its sixth straight positive day, marking its longest streak since November. This remarkable recovery comes just weeks after President Trump's April 2 tariff announcements sent markets into a tailspin.
The Dow climbed 300 points (0.75%), while the S&P 500 gained 0.58% and the Nasdaq Composite rose 0.55%. The rally accelerated in the afternoon after Commerce Secretary Howard Lutnick told CNBC that the White House was close to announcing a trade deal, though he didn't specify which country. President Trump later added fuel to the fire, saying that tariff negotiations with India are "coming along great" and that the U.S. could soon strike an agreement with the country.
Since the stock market bottomed on April 8, the S&P 500 has risen 11.5%, the Nasdaq Composite has gained about 14.4%, and the Dow Jones Industrial Average is up about 7.7%. President Trump's 90-day tariff delay on April 9 sparked the initial rally.
Despite the impressive recovery, many Wall Street strategists are warning investors against excessive optimism.
"Unlike at the market lows, there is much less 'bad news' priced into the market, while the current outlook remains highly uncertain," Truist co-CIO Keith Lerner wrote in a note to clients on Monday. "There is less of a buffer should markets receive some bad news."
HSBC became the 12th major Wall Street firm to cut its S&P 500 year-end target since Trump's tariff announcements, slashing its forecast from 6,700 to 5,600. HSBC's head of Americas equity strategy Nicole Inui recommended clients position "defensively" amid risks of higher inflation, slower growth, and possibly a recession.
"We expect the market narrative will flip-flop between recession and stagflation until tariff turmoil subsides, the Fed starts easing, and/or inflationary pressures fail to build up," Inui wrote.
Morgan Stanley chief investment officer Mike Wilson wrote in a note to clients on Sunday that he sees the S&P 500 trading in a range of 5,000 to 5,500 in the near term. Wilson believes a tariff deal with China that "materially" brings down the effective tariff rate could be what is needed to push the benchmark index above 5,500 for a sustained period.
"Until we see clearer risk-on shifts in these factors, range trading is likely to continue," Wilson said.
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The market's optimism faced a reality check in after-hours trading as several major companies reported disappointing results.
Snap plunged 13% after declining to provide Q2 guidance, citing macroeconomic uncertainties that could weigh on advertising demand. Finance chief Derek Andersen said during an earnings call that some advertisers have already reported negative impacts from the upcoming end of the de minimis exemption scheduled for May 2, which currently allows shipments under $800 to enter the U.S. duty-free.
Starbucks shares dropped nearly 7% after missing both earnings and revenue estimates. The company reported same-store sales figures that reflected a decline for the fifth straight quarter. Starbucks posted adjusted earnings per share of 41 cents on $8.76 billion in revenue, while analysts polled by LSEG expected 49 cents in earnings per share on $8.82 billion in revenue.
Meanwhile, Super Micro Computer fell about 16% after announcing disappointing preliminary fiscal third-quarter results. First Solar also contributed to after-hours pessimism, falling 10% after offering weak full-year guidance, projecting earnings between $12.50 and $17.50 per share against analyst expectations of $18.14.
One factor supporting the rally was President Trump's executive order signed Tuesday to support automakers by preventing additional tariffs on foreign-made cars from being layered on top of existing tariffs. This means automakers paying Trump's auto tariffs on imports won't also be charged for other duties like those on steel and aluminum.
The move sparked optimism for further dial-down in trade tensions, contributing to the market's ability to climb back from sharp intra-session losses on Monday. However, Treasury Secretary Scott Bessent tempered enthusiasm, saying the tit-for-tat tariffs between the U.S. and China were not sustainable—for China. He also declined to confirm whether Trump had spoken with Chinese President Xi Jinping.
Adding to concerns, the Conference Board's Consumer Confidence Index for April came in at 86, a significant drop from March's revised 92.9 reading and below the 88 reading expected by economists. This marked the fifth consecutive monthly decline, bringing confidence to levels not seen since the onset of the COVID-19 pandemic.
Particularly alarming was the "Expectations Index," which tracks consumers' short-term outlook for income, business, and labor market conditions. It fell to 54.4 in April from 65.2 last month—the lowest level since October 2011. Historically, a reading below 80 signals a recession in the coming year.
Meanwhile, average 12-month inflation expectations reached 7% in April—the highest since November 2022, when the U.S. was experiencing extremely high inflation.
Investors are now turning to a slew of significant Big Tech earnings that have yet to come out this week, during the busiest stretch of the first-quarter earnings season. Meta Platforms and Microsoft are expected to report on Wednesday, while Apple and Amazon are set to report on Thursday.
On the economic data front, Wednesday brings the first reading of Q1 GDP along with the personal consumption expenditures (PCE) price index for March. ADP will also issue private payrolls data for April.
LPL Financial chief equity strategist Jeff Buchbinder offered a sobering historical perspective: "U.S. equities have picked up the pace as April 30 rapidly approaches, aiming for the monthly flatline and recouping losses following President Donald Trump's tariff barrage. Unfortunately, history tells us April showers likely won't bring us May flowers. The old investor adage of 'sell in May' also suggests U.S. stocks may continue to chop along in the near future, with the potential for more bouts of volatility in the months ahead."
April has been a rocky month for markets. Trump's sweeping tariff announcement on April 2 led to numerous sessions of volatile trading. The S&P 500 briefly entered a bear market on April 7 but has since made a recovery, and is down 0.9% this month. The Dow has suffered a 3.5% loss so far this month, while the Nasdaq is about 0.9% higher.
For now, the market appears to be balancing renewed optimism about potential trade deals against persistent concerns about economic growth, inflation, and the sustainability of corporate profits in an increasingly complex global trade environment.
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