Stocks Soar as Tariff Relief Fuels Market Optimism
Bucharest — May 13, 2024 — On Monday, the stock market saw significant gains as an inevitable result of easing tariff pressures. Major indexes responded positively with notable gains, reflecting renewed investor confidence. The Dow surged, the S&P 500 climbed, and the Nasdaq led the charge. Following a period of uncertainty, the rally suggests a shift in sentiment among investors, but keep a close eye on the coming inflation data for more insights into market performance.
Stocks Soar as Tariff Relief Fuels Market Optimism
Wall Street breathed a collective sigh of relief Monday, sending stocks soaring after indications of easing tariff pressures. The major indexes responded with significant gains, reflecting renewed investor confidence.
In early afternoon trading, the Dow Jones Industrial Average surged by 1,110 points, a 2.7% increase. The S&P 500 followed suit, climbing 3.2%, while the Nasdaq Composite led the charge with a robust 4.2% rally.
Key Market Indicators and Technical Breakouts
The day’s trading saw major indexes vaulting back above their 200-day moving averages, a key technical indicator watched closely by analysts. The Dow is now poised to close more than 10% above its April 8 closing low,signaling a potential exit from its recent technical correction. The Nasdaq has already surpassed this threshold, trading more than 20% above its April 8 close, a move that could usher the index into a new bull market.
Analyst Insights: A Shift in Market Sentiment
Frank Cappelleri, founder of CappThesis, noted that the market’s upward trajectory has been building as the lows of early April. today’s run follows steady breakouts since the market’s lows earlier in April,
Cappelleri told Barron’s. He highlighted the S&P and Dow’s notable nine-day rally, fueled by expectations that tariff tensions would ease before inflicting lasting economic damage.
However, Cappelleri also cautioned about potential profit-taking, emphasizing the importance of investor behavior during pullbacks. At some point, we’ll see more profit-taking, and the key will be whether investors continue to view those pullbacks as buying opportunities rather than signs of deeper trouble,
he stated. That’s a big shift from March and April, when sentiment was dominated by fears of retesting the lows.
Looking Ahead: Inflation and Economic Data
With tariff concerns temporarily sidelined, the market’s focus is expected to shift back to inflation and broader economic conditions. All eyes are now on the consumer price index (CPI) for April, scheduled for release Tuesday, wich will provide crucial insights into the current inflationary environment.
Strategic Outlook: Citi’s Perspective
Citi strategist Scott Chronert observed that the recent rally has propelled the S&P 500 above his initial year-end target of 5800, set on April 11. While acknowledging the potential for further gains driven by shifting tariff sentiment, Chronert remains cautiously optimistic.
No doubt, shifting tariff sentiment may lead to an overshoot of our base case target. However, we expect that markets will eventually need to digest recent gains as index fundamentals remain exposed to ongoing broader tariff pressures. For us, higher conviction follow-through opportunities are most evident at the sector level.
Scott Chronert, Citi Strategist
