Market Pulse: Highs & Hurdles

The SPY Trader

Fresh news and strategies for traders. SPY Trader episode #1289. Welcome back to Spy Trader, your daily dive into the market's heartbeat. I'm your host, Market Maverick Mike, and it's 6 am on Sunday, July 6th, 2025, Pacific time. We're looking at a fascinating week ahead for the US stock market, kicking off on Monday, July 7th. The market recently saw the S&P 500 and Nasdaq Composite hit fresh alltime highs, with the S&P 500 climbing an impressive 10.6% in the second quarter, finishing the first half of 2025 at a record high. This was largely fueled by a strongerthanexpected June jobs report. However, some analysts are calling the market 'overbought' in the short term, leading to a 'slightly bearish' outlook for the upcoming week, although a big pullback isn't widely expected. Historically, July tends to be a favorable month for bullish trends. Looking at the big picture, trade policy is a major focus. The critical date is July 9th, when the pause on higher US tariffs is set to expire. If new trade deals aren't finalized, we could see significantly higher levies on goods from economies without agreements. We've seen some movement, like the recent deal with Vietnam, which imposes a 20% US tariff on their imports while eliminating tariffs on American exports. But this ongoing trade uncertainty has already led to reduced global GDP growth projections for 2025 and 2026, and many companies are holding back until there's more clarity. On the inflation and interest rate front, US headline inflation is at 2.4%, with core inflation still a bit higher. The Federal Reserve has previously cut rates, but that strong June jobs report has dampened expectations for further immediate cuts, with traders now seeing a lower chance of a July cut. We'll be closely watching the FOMC meeting minutes, due midweek, for insights into policymakers' divided views on future rate adjustments. The labor market showed surprising strength in June, adding 147,000 jobs, which was more than economists expected, and the unemployment rate dipped to 4.1%. This suggests a robust job market that could support consumer spending. However, there are broader signs of strain, including slowing job growth overall, falling job openings, and layoffs in some sectors, particularly technology. And let's not forget the US national debt, which has now exceeded $37 trillion. Some economists warn this could temper the positive effects of recent fiscal policies. The economic calendar for July 7th to 11th is a bit lighter on major releases. On Tuesday, July 8th, we'll see Consumer Credit data. Wednesday, July 9th, brings EIA Crude Oil Inventories, the MBA Mortgage Applications Index, and Wholesale Inventories. Thursday, July 10th, features Continuing Claims and Initial Claims, along with EIA Natural Gas Inventories. And Friday, July 11th, rounds out the week with the Treasury Budget release. As mentioned, the FOMC meeting minutes will also be released midweek. From a sector perspective, Technology and Communication Services are projected to show strong earnings growth for the second quarter of 2025, with expectations of 17.7% for technology and 31.8% for communication services. Big Tech and AIrelated stocks are anticipated to continue outperforming. Healthcare and Leisure & Hospitality are currently driving most of the new job creation, while tech, retail, and government sectors are experiencing hiring slowdowns or declines. Notably, Delta Airlines previously withdrew its optimistic 2025 forecast due to global trade uncertainties. This week also features several AIfocused conferences, like the 'AI for Good Global Summit 2025' in Geneva and 'RAISE Summit 2025' in Paris. While these are industry events and not companyspecific announcements, they underscore the ongoing interest and developments in the AI space. So, what does all this mean for your portfolio? The market next week is likely to see moderate volatility with a slight bias towards caution, primarily because of that July 9th tariff deadline and the ongoing uncertainty around future Fed policy. While recent momentum has been bullish, the market's 'overbought' status and potential traderelated headlines could trigger pullbacks. The trade deadline is the most significant known event. If new deals aren't secured, higher tariffs could negatively impact corporate earnings and global growth, potentially creating selling pressure, especially in sectors heavily reliant on international trade. Fed policy is also a bit ambiguous. The strong jobs report has reduced immediate rate cut expectations, which might be a slight negative for equities that have benefited from the prospect of lower borrowing costs. The FOMC minutes will offer crucial insights, but if they reinforce a 'higher for longer' rate stance, it could temper bullish sentiment. On the flip side, the market did close at record highs, driven by positive sentiment and strong jobs data. This underlying bullishness and the fear of missing out could provide some support, especially if positive news emerges on the trade front, and July seasonality typically favors the bulls. Overall, we're seeing mixed economic signals. While the labor market remains strong, there are signs of slowing job growth in some sectors and broader economic uncertainty from trade policies. However, there are clear sectorspecific strengths, particularly in technology and communication services, which are anticipated to deliver robust earnings. Now, for some concrete recommendations. For our longterm investors, the advice remains clear: Stay diversified. Given the trade uncertainties and potential for shortterm volatility, a diversified portfolio across various sectors and asset classes is crucial. Continue to favor quality growth companies with strong fundamentals, resilient business models, and a proven ability to generate earnings growth, especially in the technology and communication services sectors, which are projected to have strong secondquarter earnings. If you have capital to deploy, consider dollarcost averaging to mitigate the impact of potential shortterm market fluctuations. And definitely review your holdings for companies with significant exposure to international trade and potential tariff impacts. While a blanket selloff might not be warranted, it's important to understand the potential risks. For our shortterm traders and active investors, you'll want to monitor trade news very closely. Be highly responsive to news releases regarding trade deals and tariffs, especially around July 9th. Positive news could spark a rally, while negative news could lead to a sharp selloff. Given that the S&P 500 and Nasdaq are at alltime highs and considered 'overbought' in the near term, be prepared for potential pullbacks or consolidation. Look for trading opportunities in technology and communication services, as these are expected to report strong earnings. While the week is lighter on major releases, the Consumer Credit report, jobless claims, and the FOMC minutes could still move the market. And finally, always implement stoploss orders. Given the potential for volatility around trade news, using stoploss orders can help manage your downside risk effectively. In summary, next week presents a delicate balance of positive momentum and significant eventdriven risk. A cautious yet opportunistic approach, with a keen eye on trade developments, is definitely advisable. That's all for this edition of Spy Trader. I'm Market Maverick Mike, and I'll catch you next time!