Trade deals in focus amid stock market rebound: What to know this week

May 18, 2025
trade-deals-in-focus-amid-stock-market-rebound:-what-to-know-this-week

 Josh Schafer

5 min read

In This Article:

Growing investor confidence on US trade deals has sent stocks to their highest levels in more than two months.

Last week, the S&P 500 (^GSPC) rose 5.3% while the Nasdaq Composite (^IXIC) soared 7.2%. The Dow Jones Industrial Average (^DJI) popped about 3.4%. Both the S&P 500 and Nasdaq have now recouped their losses from the initial tariff-driven sell-off in early April and are in positive territory year to date.

Tariff headlines will remain in focus in the coming week, a quiet one for scheduled announcements in markets. Updates on activity in the manufacturing sector and weekly filings for unemployment highlight the light economic calendar.

With the bulk of companies done reporting first quarter earnings, results from Palo Alto Networks (PANW), Target (TGT), Home Depot (HD), and Workday (WDAY) will be in focus.

The top story in markets remains Trump’s trade war. News of a 90-day tariff pause with China sent stocks roaring last week and prompted several Wall Street strategists to get more bullish on their outlooks for the S&P.

President Trump said Friday that the US will set tariff rates for its trading partners within the next few weeks. In a note to clients defending his year-end S&P 500 target of 6,500, Fundstrat head of research Tom Lee wrote that if “tariff deals are soon announced, equities can further recover.”

But strategists have also noted that most tariffs are just paused, with negotiations for actual deals still ongoing. This leaves a considerable amount of policy uncertainty lingering in markets.

“I do think we still need to be a little bit cautious until we have a more cemented agreement, not just with China but with Europe as well. And that’s still on the back burner,” Victoria Fernandez, Crossmark Global Investments chief market strategist, told Yahoo Finance.

Many economists have argued recession odds significantly decreased over the past week following the latest tariff pause. This has coincided with a shift in the market’s expectations for the Federal Reserve this year.

Investor bets on the Fed’s next interest rate cut now favor July, a shift from chances favoring June prior to the tariff delay, per the CME FedWatch Tool. Bloomberg data shows markets are now pricing just two 25 basis point interest rate cuts for the full year, down from three seen the week prior.

With limited new data coming in the week ahead, focus will shift to the nine scheduled speeches from Federal Reserve members. But Bank of America US economist Aditya Bhave doesn’t believe investors will learn much new about the Fed’s wait-and-see approach.


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