A Mixed Earnings Report and Tariff Risks Dampen the Rally in the S&P 500

U.S. stocks opened the day with choppy trading, bouncing between gains and losses as mixed corporate earnings reports renewed investor concerns about the potential fallout from ongoing global trade tensions. At 9:30 a.m. in New York, both the S&P 500 Index and the Nasdaq 100 Index remained flat, while the Dow Jones Industrial Average slipped 0.1%.

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The Russell 2000 Index, which tracks smaller-cap stocks, declined by 0.7%. Meanwhile, the Cboe Volatility Index (VIX), often viewed as Wall Street’s fear gauge, hovered around the 26 mark, signaling ongoing market uncertainty.

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Earnings results from major U.S. companies provided a range of signals, prompting investors to proceed cautiously. One of the biggest drags came from Intel Corp., whose shares plummeted 7.8% after the company issued a weaker-than-expected earnings forecast.

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Alongside that downbeat outlook, Intel also announced job cuts, deepening concerns about its near-term performance and broader industry headwinds.

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In contrast, Alphabet Inc., the parent company of Google, gave markets a lift after reporting first-quarter earnings that exceeded Wall Street expectations. The stock led gains among the so-called “Magnificent Seven” technology giants. Apple Inc. shares were little changed, remaining steady after Bloomberg reported that the company plans to shift the bulk of iPhone production for the U.S. market to India by the end of next year, according to sources familiar with the matter.

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Commenting on the cautious tone of many corporate outlooks, Sarah Hunt, chief market strategist and partner at Alpine Saxon Woods, noted that although companies haven’t yet reported significant damage from tariff hikes, they remain wary about the future.

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“Managements are cautious on forward guidance even as they’ve not yet seen much deterioration due to the tariff announcements,” she said. “The mixed messaging about what is happening in the U.S.-China trade talks may also be one of the reasons the market is slightly lower.”

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There have been some signs of potential easing in the trade dispute. According to sources close to the matter, China is considering lifting its steep 125% tariffs on certain American goods. The government may remove additional duties on items such as medical equipment, select industrial chemicals including ethane, and aircraft leasing arrangements. These discussions appear to reflect growing pressure from the economic consequences of the ongoing trade conflict.

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Data from Bloomberg Intelligence suggests that U.S. corporations, particularly those in the S&P 500, may be more vulnerable to sustained tariffs than previously thought. Analysis shows that most of the profit margin growth for the S&P 500 over the past two decades has been driven by the booming technology sector. If tech gains are stripped out, overall corporate profitability has seen only minimal improvement, pointing to the fragile nature of broader margin expansion.

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Despite the uncertainty, the S&P 500 is still on pace to close the week with a solid gain of 4%, which would mark its second-best weekly performance since September. Sector-wise, consumer discretionary, information technology, and communication services stocks have led the charge, while more defensive sectors like healthcare and consumer staples have lagged.

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However, strategists at Bank of America warn against getting overly optimistic. They advise investors to take profits during market rallies, arguing that the foundation for a prolonged upward trend is still lacking. Factors such as uneven earnings, shaky global trade dynamics, and fragile investor sentiment could prevent a sustained bull run.

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Another sign of caution comes from international investors. According to Goldman Sachs strategists, foreign investors have sold around $63 billion worth of U.S. equities since the beginning of March, with European investors driving much of that selling.

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On the flip side, Bank of America reports that long-only global equity funds posted their first weekly inflow since January, taking in $800 million. While this may hint at a shift in sentiment, it remains unclear whether this marks the start of a broader trend.

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In summary, while the U.S. stock market has made impressive gains this week, uncertainty around corporate earnings and the global trade environment continues to cloud the outlook. Mixed results from major companies, cautious forward guidance, and geopolitical unpredictability have kept investors on edge. As the market absorbs these developments, volatility is likely to persist, with traders watching closely for clearer signs of economic resilience or further risk.

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