Stocks Search for Direction as Macro and Micro Forces Collide
Tuesday’s session was all over the place — and that’s putting it mildly. The S&P 500 hovered near unchanged but found some footing on easing trade tensions.
President Trump signed an executive order that dials back auto tariffs, offering temporary relief for foreign auto parts used in U.S.-made vehicles. The new rule lets automakers recoup a portion of their tariff costs, with reimbursement tapering over time to nudge supply chains stateside.
That tariff tweak gave cyclical stocks a lift, but the economic data brought a cold shower.
The U.S. trade deficit for March widened far more than expected, hitting a record -$162 billion — a full $17 billion wider than economists were projecting. That’s a clear drag on Q1 GDP, which already faces headwinds from tepid personal spending and weakening consumer confidence. The Conference Board’s confidence index sank to 86.0, the lowest reading in nearly five years.
Corporate Earnings: Bright Spots and Red Flags
Company results painted a mixed picture. SBA Communications jumped over 6% after hiking its full-year revenue forecast, while Honeywell gained more than 5% on stronger-than-expected Q1 numbers and a bullish Q2 outlook. On the flip side, chipmaker NXP Semiconductors slid over 6% after warning about a tough global environment and announcing its CEO will retire.
It’s a gut punch for those who follow the stock and were looking for the stock to start off a seasonally strong May pattern, with a 14-year average close of 3%, with some stellar returns the last few years.
Despite the gap down on the news, it might be a good time to enter, should the seasonal pattern hold true this year.
Looking ahead, earnings from Microsoft and Meta will drop after the close. Apple and Amazon follow on Thursday. These reports could set the tone for the tech-heavy Nasdaq, which has been stuck in a choppy range.
With more than a third of S&P 500 companies already reporting, 75% have topped expectations, but forward guidance has been murky. Full-year 2025 profit growth for the S&P 500 is now seen at +9.4%, down from +12.5% at the start of the year.
Sell in May… or in April?
The old Wall Street adage “Sell in May and go away” might be arriving a little early this year. Seasonality watchers have noted that more traders are front-running the May-to-October weakness, potentially shifting selling pressure into late April. Add in the algorithmic crowd and retail traders who’ve done their homework on seasonality patterns, and you’ve got a self-fulfilling pullback in play — even before the calendar flips.
Historically, the May-through-October stretch has underperformed, and as more investors learn the pattern, the timing may keep shifting earlier. This week’s heavy macro slate and the potential for earnings disappointments could be the spark that accelerates that seasonal play.
The top row is the average return for each month, and even though April has a greater average return, the last few years have been horrible for the S&P 500, whereas traders who “Sell in May, and Go Away” are missing out on positive returns since 2020.
What Traders Are Pricing In
Rate cut expectations have faded. Futures are only pricing in less than a 10% chance of a 25-basis-point cut at next week’s FOMC meeting — a sharp drop from earlier in the year.
The Week Ahead: Big Data, Bigger Reactions
Wednesday is packed. Watch for:
- Q1 GDP — Expected +0.4% (annualized), with core PCE up +3.0%
- March personal spending — Forecast +0.6%
- March income — Forecast +0.4%
- Core PCE (y/y) — Still tracking at +2.2%
On Thursday, we’ll get the April ISM Manufacturing Index, expected to dip to 48.0. Then on Friday, it’s the big one — the April jobs report, with expectations of just +130,000 nonfarm payrolls and the unemployment rate holding steady at 4.2%.
Bottom Line
This is a trader’s market. With data driving daily sentiment and earnings still in the spotlight, don’t expect smooth sailing. Seasonal patterns are creeping in earlier, macro risks are stacking up, and price levels are in play. Stay nimble, stay alert, and don’t get caught snoozing through what could be the most pivotal week of Q2.
