Earnings reports from tech giants drive a rebound in US stocks, while Trump's tariff policy sparks inflation concerns.

Strong earnings reports from tech giants have spurred a rebound in the US stock market, with the S&P 500 index rising for nine consecutive days, achieving the longest rally in 20 years. The Trump administration's push for a new round of high tariffs has sparked market concerns over corporate profits and inflation pressures. Investors are closely monitoring the Federal Reserve's interest rate decisions and inflation data to identify medium- to long-term investment opportunities.

Tech Earnings Bolster Market, S&P 500 Achieves Longest Rally in 20 Years

As of May 1, nearly 70% of the S&P 500 companies have reported earnings, with 47.7% surpassing revenue expectations, and overall earnings per share (EPS) growing by 14.48% year-over-year. FactSet estimates overall profit growth this quarter could reach 10.1%. Technology and industrial stocks led the gains, with Microsoft's Azure cloud business growing 33% year-over-year, with AI accounting for 16 percentage points, boosting stock performance; Meta also continues to increase AI investments, enhancing the overall tech sector sentiment.

However, some companies like Qualcomm, Super Micro Computer, and Snap faced stock pressure due to mentions of trade war uncertainties, indicating the market's high sensitivity to Trump's tariff policies.

Mixed Economic Signals, Inflation Easing Becomes Market Focus

The latest economic data shows the U.S. first-quarter GDP preliminary annualized rate at -0.3%, marking the first negative growth since 2022. Initial jobless claims rose to 223,000, and the Consumer Confidence Index fell to 86, the lowest since May 2020. The April ISM manufacturing index dropped to 48.7, indicating continued manufacturing contraction, but the price index rose to 69.8, reflecting ongoing cost pressures.

On inflation, the March core PCE increased by 2.6% year-over-year, slightly above the Federal Reserve's 2% target but has slowed from previous periods. The market generally expects the inflation trend to continue cooling, providing room for the Federal Reserve to cut rates. According to the CME FedWatch Tool, the probability of a rate cut in June has dropped from 75% to below 40%, while the probability in July has exceeded 50%. Goldman Sachs and Barclays have both postponed their rate cut expectations to July, noting that the Federal Reserve is waiting for more clarity on economic and tariff policies.

Tariff Policies Reshape the Investment Landscape, Companies Face Long-term Uncertainty

In early April, the Trump administration announced a new round of tariff measures, imposing tariffs ranging from 10% to 25% on goods from China and other trade partners, leading to trillions of dollars in market value evaporating from U.S., European, and Japanese stock markets, with the dollar and stock markets falling simultaneously, and bond yields rising. The Peterson Institute for International Economics estimates that if average tariffs rise to 20%, U.S. GDP in 2026 will decrease by 0.7 percentage points, and if other countries implement retaliatory tariffs, the economic downside risk could further increase.

For companies, the rise in trade protectionism is limiting long-term investment and factory construction plans. Research indicates that companies find it difficult to predict future tariff levels, leading to slow progress in manufacturing reshoring and supply chain restructuring. Some consumer goods prices have risen, putting pressure on low-income households and further suppressing consumer spending.

Additionally, the dollar has continued to weaken since Trump's election, contrary to the expectation that tariffs should boost the dollar. Analysts point out that this phenomenon could cause actual inflation to rise by more than 1.2 percentage points, posing a challenge to Federal Reserve policy.

Investors Eye Medium to Long-term Opportunities, Market Gradually Adapts to New Policies

Despite increased short-term volatility, some investors believe the market is gradually adapting to the policy environment of the Trump 2.0 era. A manager at Franklin Templeton's U.S. Opportunities Fund noted that many quality companies have been wrongly punished due to non-tariff factors, offering medium to long-term value investment opportunities. FactSet and Refinitiv estimate that S&P 500 company profits will grow by 9.7% in 2025, with the tech industry growing by 18.6% annually, and Russell 2000 small-cap companies expected to grow profits by 36.6%.

The Trump administration is also promoting the "Grand Splendid Act," which includes tax cut extensions and energy policy deregulation, expected to be pushed through by July 4. If successfully implemented, market confidence is expected to be supported.

U.S. Stock Market Rebound Continues, Market Sentiment Stabilizes

Amid strong tech earnings and Trump's temporary suspension of some tariff measures, U.S. stocks have rebounded about 12% from the April low. The S&P 500 index has risen for nine consecutive days, marking the longest rally since 2005. The Dow Jones Industrial Average and the Nasdaq Index also rose, up 2.5% and 2.7%, respectively. Although the market experienced severe fluctuations in early April due to tariff policies, with the S&P 500 once falling over 12%, market sentiment quickly stabilized after Trump announced a 90-day tariff suspension for "non-retaliatory countries."

Tech and growth stocks have performed outstandingly in this rebound, especially the "Magnificent Seven" large tech stock group, benefiting from AI and cloud business growth, becoming the main flow of market funds.

Earnings reports from tech giants drive a rebound in US stocks, while Trump's tariff policy sparks inflation concerns.

Key Updates

On May 5, 2025, the U.S. stock market experienced a pullback as the Dow Jones Industrial Average and S&P 500 indices declined due to Trump's tariff policy.

Michael Wilson, Chief Strategist at Morgan Stanley: U.S. stocks show strong resilience, recommends investing in high-quality growth stocks and large-cap companies.

U.S. stock futures are down across the board: Dow is down more than 270 points, indicating market caution.

European stock markets rebound strongly: Easing of the US-China trade war boosts the market, UK stocks achieve a 15-day winning streak, Airbus's performance boosts its stock price.

All four major U.S. stock indices rose across the board on May 1: The S&P 500 achieved its longest streak of consecutive gains since 2004, boosted by employment data and trade talks.