Trump Faces Stark China Deal Deadline, Morgan Stanley Warns

After the very strong technical action last week, the market was due for a rest on Monday. The S&P 500 had its first down day after nine straight days of gains. The selling was mild, with around 3,700 stocks gaining versus 6,100 declining. The Magnificent Seven were the laggards, with a loss of about 1%, with Apple AAPL being the biggest loser.

It was an uninteresting session, but it was technically healthy. The market can afford to consolidate as it awaits more news on trade and tariffs. Strategist Michael Wilson of Morgan Stanley MS believes that a trade deal with China must come fairly soon if the market is going to hang on to recent gains. If that deal does not happen, then supply chains will be in danger. At this point, there is no indication that substantive talks are even taking place.

Both bonds and the dollar were weak, which is not supportive of near-term upside. Bonds have been down four sessions in a row and are looking to test the low point of the year. Interest rates are likely to continue to move higher as worries about the inflationary impact of tariffs intensify.

The market is in a wait-and-see situation now, and everyone is waiting for developments on tariffs. There are still high hopes of a trade deal with a country like India or South Korea at any time, and that is what keeps a strong bid under the market for now.

Earnings from many small stocks are rolling in this week, but AI leader Palantir Technologies PLTR is the headline on Monday night. The company reported inline EPS numbers, but there was a revenue beat and increased guidance. The stock is technically extended and is down slightly on the news, but management tends to be very upbeat during conference calls.

Have a good evening. I’ll see you tomorrow.

At the time of publication, DePorre had no positions in any securities mentioned.