Key Drivers of U.S. Stock Market Trends This Week: Trump's Tariff Negotiations, Federal Reserve Policy, Economic Data, Computex Taipei, and Corporate Earnings

Taiwan • Business • 05/18 10:17
Key Drivers of U.S. Stock Market Trends This Week: Trump's Tariff Negotiations, Federal Reserve Policy, Economic Data, Computex Taipei, and Corporate Earnings

Last week, the major U.S. stock indices rebounded, with investors focusing on five key variables: the Trump administration's tariff policy and trade negotiations, the Federal Reserve's policy stance, U.S. economic data, technology information from the Taipei International Computer Show (COMPUTEX 2025), and corporate earnings, especially the growth expectations for tech stocks. These factors will influence the short-term trend of U.S. stocks.

Key Updates

05/20 04:48

Retail investors pour into Tesla, Palantir, and Bitcoin ETF: Record buying helps stabilize the US stock market, mitigating the effects of Moody's downgrade.

After Moody's downgraded the U.S. sovereign credit rating, retail investors sparked a record-breaking buying spree on May 19, with a net purchase of $4.1 billion in U.S. stocks, reaching a new all-time high. Tesla, Palantir, and Bitcoin ETF were the primary targets for capital inflow. Despite the S&P 500 index dropping more than 1% in early trading, it recovered due to retail buying, closing up 0.09%. Wall Street analysts recommend that investors see market pullbacks as opportunities to increase their positions.

05/19 22:49

Moody's Downgrades U.S. Credit Rating, U.S. Stocks Rebound Despite the Downgrade: Dow Jones Gains 137 Points, Philadelphia Semiconductor Index Declines

On May 16, Moody's downgraded the U.S. sovereign credit rating from "Aaa" to "Aa1," causing initial market volatility. However, on May 19, the three major U.S. stock indices closed higher despite the trend. The Dow Jones Industrial Average rose by 137.33 points, the S&P 500 inched up 0.09%, the Nasdaq ticked up 0.02%, while the Philadelphia Semiconductor Index fell by 0.50%. Investor sentiment steadied as retail buying supported the market, showing confidence in U.S. assets. In the bond market, the yield on the U.S. 10-year Treasury rose to 4.55%, and safe-haven assets like gold rose 1.54%.

05/19 13:47

CNBC personality Jim Cramer calls out the week's top ten stock market events and five must-know things before Monday's market opens.

On May 19, 2025, Moody's downgraded the United States' sovereign credit rating, leading to a drop in U.S. stock futures, a rise in long-term bond yields, and a withdrawal of funds from risk assets. CNBC host Jim Cramer listed the top ten stock market events for the week, including corporate earnings reports, the impact of the downgrade, and developments in AI technology. The five key points to watch before Monday's market opening provide context, including Moody's downgrade, last week's stock market rebound, Nvidia's new technology, progress on the congressional budget bill, and the tariff dispute involving Walmart and Trump.

05/19 10:50

AI chips are becoming the new global currency: Bank of America is optimistic about Nvidia and AMD, Saudi Arabia's major order highlights the demand for AI infrastructure

A report by the Bank of America indicates that AI chips are emerging as the "new currency" in global geopolitical and economic negotiations, whose strategic value surpasses that of traditional tech products. Saudi Arabia has entered into multi-billion dollar AI infrastructure agreements with NVIDIA and AMD, and global AI infrastructure spending is expected to reach $6.7 trillion by 2030, with chip designers capturing a $3.1 trillion market share. This "sovereign AI" wave led by the Middle East is reshaping the power dynamics of global technology and capital markets.

05/19 06:51

U.S. stock index futures continue to decline following Moody's credit rating downgrade: Dow futures at one point fell more than 300 points.

On May 19, 2025, Moody's downgraded the U.S. sovereign credit rating from Aaa to Aa1, leading to a decline in U.S. stock futures during the Asian trading session. Dow Jones Industrial Average futures fell by 311 points, S&P 500 futures fell 60 points, and Nasdaq 100 futures declined 278 points. This downgrade sparked market concerns, affecting global stock markets and driving up the prices of safe-haven assets such as gold. U.S. Treasury yields neared 4.5%, becoming a key focus for the market, potentially impacting the flow of funds into the stock market.

05/18 10:17

Key Drivers of U.S. Stock Market Trends This Week: Trump's Tariff Negotiations, Federal Reserve Policy, Economic Data, Computex Taipei, and Corporate Earnings

Last week, the major U.S. stock indices rebounded, with investors focusing on five key variables: the Trump administration's tariff policy and trade negotiations, the Federal Reserve's policy stance, U.S. economic data, technology information from the Taipei International Computer Show (COMPUTEX 2025), and corporate earnings, especially the growth expectations for tech stocks. These factors will influence the short-term trend of U.S. stocks.

05/17 22:17

Moody's downgrade of U.S. debt leads to an increase in yields, as Trump signs a $2 trillion deal during his Middle East trip, boosting AI and prompting a stock market rebound.

On May 16, 2025, Moody's downgraded the United States' sovereign credit rating from "Aaa" to "Aa1," leading the 10-year U.S. Treasury yield to rise to 4.49%, and U.S. stocks were under pressure after hours. President Trump visited the Middle East that same week, signing economic and arms deals exceeding $2 trillion with Saudi Arabia, the UAE, and Qatar, and facilitated cooperation on AI chips, which boosted tech stocks. Despite the short-term volatility caused by the downgrade, the market remained optimistic due to the strong performance of AI and tech stocks.

05/17 14:27

Lisa Shalett, Chief Investment Officer at Morgan Stanley, warns: The rebound in U.S. stocks might be coming to an end, suggesting a shift from technology stocks to the financial and healthcare sectors.

Morgan Stanley Wealth Management's Chief Investment Officer, Xia Leite, warns that the rebound in U.S. stocks is unlikely to be sustained. She advises investors to realize profits from tech stocks and shift towards industries such as finance, energy, and healthcare, which benefit from regulatory easing. She points out that there is a structural shift in the AI sector, with corporate revenues and free cash flows below expectations, constraining the market's upward potential. Xia Leite's view aligns with changes in market fund flows, indicating an increasing preference among investors for defensive and value-oriented assets.

05/16 22:55

U.S.-China Tariff Deal and Trump's Visit to the Middle East Boosts the Market: Tech Stocks Lead the Gains, All Three Major U.S. Stock Indices Rise

On May 16, 2025, the US stock market closed higher across the board due to a 90-day tariff suspension agreement reached between US-China and a $200 billion trade agreement as a result of President Trump's visit to the Middle East. The Dow Jones Industrial Average rose by 331 points, the S&P 500 Index closed in the green for the fifth consecutive day, and the Nasdaq Composite rose by nearly 100 points. Tech stocks led the rally, with Tesla and Nvidia stocks rising 17% and 16% respectively this week. However, the US consumer confidence index dropped to its second-lowest level on record, and inflation expectations hit their highest level since 1981, contributing to market uncertainty.

05/16 21:54

U.S. stocks have rebounded strongly this week: Outstanding corporate earnings, relief from U.S.-China tariffs, and diminished inflationary pressure

In the second week of May 2025, the U.S. stock market rebounded strongly, with the S&P 500 index rising nearly 5% for the week. Driving factors included corporate earnings exceeding expectations, a temporary pause in the US-China tariff war, inflation data indicating reduced pressures, and market expectations of a shift in Federal Reserve policies. However, the technology and semiconductor sectors performed weakly, reflecting the market's conflicting views on the AI boom versus the real economy.

Trump Tariff Negotiations: New Round of Policies to be Unveiled

U.S. President Trump stated on Friday, May 16, during a meeting with business leaders in Abu Dhabi that the U.S. will set new tariff rates for trade partners "in the coming weeks." He noted that due to limited negotiation resources, the U.S. cannot negotiate with all countries simultaneously but emphasized that demands from various countries will be handled "very fairly."

Additionally, Trump expressed dissatisfaction with retail giant Walmart's statement about potentially raising product prices in response to tariffs, demanding the company "absorb the tariff costs." Walmart had previously warned that tariff pressures would affect its second-quarter financial forecast and could lead to higher consumer prices. Meanwhile, NVIDIA supplier Foxconn also downgraded its outlook due to tariff uncertainties.

Currently, the U.S. and China have reached a 90-day tariff truce agreement, and trade agreements with the UK are also progressing. The market is closely watching whether the Trump administration can reach agreements with more countries during the truce period to reduce trade uncertainties.

Federal Reserve Policy Developments: Frequent Official Speeches, Market Focus on Interest Rate Stance

Although the next Federal Reserve (Fed) interest rate decision meeting is scheduled for June 11-12, 2024, recent public speeches by several officials will still be a key focus for market observers. According to the Fed's 2025 meeting schedule, the next meeting will be held on June 17-18.

President Trump recently called for the Fed to "cut rates soon" and again criticized Chairman Jerome Powell for being slow to act. Nonetheless, according to the CME FedWatch tool, the market currently expects a more than 70% chance that the Fed will keep rates unchanged.

In the coming week, several officials, including Fed Chairman Powell, will deliver speeches, and the market will look for the latest clues on inflation, employment, and interest rate policies.

Economic Data Releases: PMI and Housing Data as Key Focus

Upcoming U.S. economic data will provide the market with the latest assessment of economic fundamentals. According to the economic calendars of Trading Economics and Yahoo Finance, the following data will be released in the coming week:

  • May S&P Global Manufacturing Purchasing Managers' Index (PMI) preliminary value
  • April existing home sales and new home sales data
  • Initial and continuing jobless claims
  • Chicago Fed National Activity Index

These data will help the market assess whether the U.S. economy continues to expand and provide reference for the Fed's policy direction.

Taipei International Computer Show (COMPUTEX 2025): AI Technology as the Central Theme

The 2025 Taipei International Computer Show (COMPUTEX) will be held from May 20 to 23, with the theme "AI NEXT," focusing on smart computing and robotics, next-generation technology, and future mobility. NVIDIA CEO Jensen Huang and Qualcomm CEO Cristiano Amon will deliver keynote speeches.

Companies like Supermicro will also showcase the latest server and data center solutions, emphasizing liquid cooling technology and high-performance computing. This exhibition is seen as an important window to observe the development of the AI industry chain and the momentum of tech stocks.

The market is also watching the progress of the Trump administration's cooperation with Middle Eastern countries in the AI field. Trump recently announced an investment agreement with the UAE worth over $200 billion, covering AI and high-tech industries, indicating that the U.S. is actively attracting foreign investment in AI infrastructure.

Corporate Earnings Announcements: Robust Growth Expectations for Tech Stocks

In the coming week, 16 U.S. companies will release earnings reports, covering industries such as technology, retail, and healthcare. Key companies include:

  • Technology: Workday, Snowflake, Palo Alto Networks, Autodesk, Zoom
  • Retail: Target, Ross Stores, Home Depot, Lowe’s, Williams-Sonoma, Ralph Lauren, TJX, Victoria’s Secret
  • Healthcare: Medtronic, Intuitive Surgical

According to statistics from FactSet and Bloomberg, as of May 15, 92.2% of S&P 500 components have reported first-quarter earnings, with 76.7% of companies exceeding profit expectations, averaging an annual increase of 11.9%; 50.9% of revenues exceeded expectations, averaging an annual increase of 4.1%.

Tech stocks have performed particularly well, with an estimated annual profit growth rate of 18.2%, the highest among the 11 major industries. Although Intel's first-quarter earnings exceeded expectations, its stock price fell by more than 7% due to a poor second-quarter outlook. The company noted that macroeconomic uncertainty is still high and will continue to focus on core products and capital efficiency.

References

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