Futures surged during early Monday trading as U.S.-China trade negotiations yielded their first substantial breakthrough in months. This diplomatic advancement, coupled with last week’s steady Fed policy stance, creates a markedly improved backdrop as we enter a week packed with critical economic data.
The combined 145% U.S. levies on most Chinese imports will be reduced to 30% by May 14, while the 125% Chinese duties on U.S. goods will drop to 10%—a significant de-escalation that offers markets a much-needed reprieve from months of trade uncertainty.
With inflation data, retail sales figures, and multiple Fed speakers on deck, this week will test whether the recent rally has fundamental support beyond the positive trade headlines.
Key Events This Week
Monday – May 12
- Fed Governor Kugler Speech (10:25 AM ET) First Fed commentary following the weekend’s trade developments.
- Monthly U.S. Federal Budget (2:00 PM ET) Forecast: $256B (vs. $210B prior) Deficit expected to remain elevated amid spending pressures.
Tuesday – May 13
- NFIB Optimism Index (6:00 AM ET) Forecast: 95.0 (vs. 97.4 prior) Small business sentiment may show strain from recent volatility.
- Consumer Price Index (8:30 AM ET) Forecast: +0.2% MoM (vs. -0.1% prior), +2.3% YoY (vs. 2.4% prior) Modest uptick expected after last month’s surprise negative reading.
- Core CPI (8:30 AM ET) Forecast: +0.3% MoM (vs. +0.1% prior), +2.8% YoY (unchanged) Services inflation remains sticky despite progress in goods.
Wednesday – May 14
- Fed Governor Waller Speech (5:15 AM ET) Early market mover as Waller is considered among the more hawkish FOMC members.
- Fed Vice Chair Jefferson Speech (9:10 AM ET) Will provide insight into the leadership’s thinking after last week’s policy meeting.
- San Francisco Fed President Daly Speech (5:40 PM ET) West Coast perspective on regional economic impacts from trade developments.
Thursday – May 15
- Initial Jobless Claims (8:30 AM ET) Forecast: 227,000 (vs. 228,000 prior) Labor market showing signs of modest cooling.
- Retail Sales (8:30 AM ET) Forecast: +0.1% MoM (vs. +1.4% prior) Significant slowdown expected after March’s surprisingly strong reading.
- Producer Price Index (8:30 AM ET) Forecast: +0.3% MoM (vs. -0.4% prior), Core: +0.3% MoM (vs. -0.1% prior) Potential early warning for changing inflation trends.
- Regional Manufacturing Surveys (8:30 AM ET) Empire State: -8.0, Philadelphia Fed: -10.0 Both expected to remain in contractionary territory.
- Fed Chair Powell Speech (8:40 AM ET) Critical market-moving event as Powell addresses recent economic data and trade developments.
- Industrial Production (9:15 AM ET) Forecast: +0.1% MoM (vs. -0.3% prior) Modest rebound expected after March contraction.
Friday – May 16
- Housing Starts (8:30 AM ET) Forecast: 1.36M (vs. 1.32M prior) Housing market shows resilience despite elevated mortgage rates.
- Consumer Sentiment (10:00 AM ET) Forecast: 53.0 (vs. 52.2 prior) Still near multi-year lows despite improving market conditions.
Market Insights
Last week’s Federal Reserve meeting delivered as expected, with rates held steady at 4.25-4.50%. However, beneath this headline stability, the Fed acknowledged countercurrents in the macro environment that warrant continued vigilance.
The technical picture shows the Nasdaq Composite approaching the critical 20,200 level—a break above which would clear both the 200-day moving average and a short-term negative trend line. This could potentially trigger a significant rally if an inverted head and shoulders pattern materializes as some technicians anticipate.
What makes the current environment particularly interesting is the persistent bearish sentiment among individual investors. According to the AAII sentiment survey, over 50% of respondents have maintained a negative outlook for an unprecedented 11 consecutive weeks straight. This raises important questions about who’s providing the buying pressure, with some market analysts pointing to systematic trading strategies that have reportedly deployed approximately $100 billion into global equities over the past ten days.
Single stock put-call skew—a reliable indicator of market fear levels—remains elevated above its two-year average and higher than pre-April tariff announcement levels. This suggests the current rally isn’t overcrowded and there’s room for fear levels to decline further, potentially supporting continued upside.
From a fundamental perspective, U.S. companies announced nearly $234 billion in share buybacks in April, approaching record highs. While this buyback activity offers short-term support to stock prices, the concentrated nature of market strength—with numerous stocks like Apple trading below key moving averages—warrants caution.
Bottom Line
This week represents a critical juncture for markets as the positive trade headlines meet economic reality. Tuesday’s CPI and Thursday’s retail sales figures will provide essential insight into whether the economy maintains enough momentum to justify recent gains without triggering renewed inflation concerns.
Markets are likely to remain headline-sensitive, particularly to Fed commentary. Powell’s Thursday speech could be the week’s defining moment, especially if he signals any shift in the Fed’s thinking about the inflation/growth balance in light of the major trade developments.
While the U.S.-China tariff reduction offers substantial relief, investors should remain alert to the possibility of market volatility as traders reconcile technical setups, economic data, and evolving narratives around both monetary policy and international trade.
The content provided in Market Impact is for informational purposes only and should not be considered as investment advice. Always consult with a qualified financial advisor before making investment decisions.