Market Rises: Peace & Profits

Fresh news and strategies for traders. SPY Trader episode #1260. Welcome to Spy Trader, your goto podcast for navigating the markets with clarity and a dash of good humor! I'm your host, Money Mike, and it's 6 am on Tuesday, June 24th, 2025, Pacific Time. The US stock market is certainly looking sprightly this morning, coming off a bit of a volatile patch. Let's dive into what's moving the needle. Our major indices are all in the green. The S&P 500 Index is up a solid 0.96 percent, trading at 6,025.17 points. The Dow Jones Industrial Average is also showing strength, climbing 0.89 percent to 42,581.78 points. And the Nasdaq Composite, our tech darling, is up 0.94 percent at 19,630.98 points. This positive momentum comes after a bit of a threeday losing streak for the S&P 500, so it's a welcome sight. Shifting to sector performance, it's a bit of a mixed bag, showing a selective market. Consumer Discretionary is leading the charge, largely thanks to Tesla, which jumped approximately 10 percent. Energy, Consumer Staples, Financials, Industrials, and Utilities are also showing gains today. However, we're seeing some underperformance in Communication Services, Materials, and Technology. Health Care and Real Estate are also pulling back slightly. Interestingly, while Energy is up today, it was actually down over 2 percent yesterday as oil prices traded sharply lower. The biggest news driving this market rally is the perceived deescalation of the IsraelIran conflict. After an Iranian missile launch that thankfully resulted in no casualties, and reports of intercepts, President Trump announced a ceasefire between the two nations. This has unwound some of the risk premium that was built into oil prices, with West Texas Intermediate futures dropping 9 percent yesterday. Now, let's talk macro. The Federal Reserve maintained its policy interest rate range at 4.25 to 4.50 percent in its June meeting. This marks the fourth consecutive meeting without a change, a cautious 'waitandsee' approach amidst uncertainties, especially with President Trump's trade policies and tariffs looming. The Fed still anticipates two 0.25 percent rate cuts later in 2025. On the inflation front, it's still a bit stubborn. The annual inflation rate, measured by the Consumer Price Index, was 2.4 percent in May, a slight uptick from April and still above the Fed's 2 percent target. Core inflation, which strips out volatile food and energy prices, stood at 2.8 percent. The Fed has even revised its Personal Consumption Expenditures inflation forecast for 2025 up to 3.0 percent. Shelter costs were a primary driver here. The US labor market remains steady but shows signs of cooling. Employers added 139,000 nonfarm jobs in May, exceeding forecasts, and the unemployment rate held steady at 4.2 percent for the third straight month. However, job openings are down from a year ago, and layoffs ticked up slightly. As for economic growth, Real Gross Domestic Product decreased at an annual rate of 0.2 percent in the first quarter of 2025. The Fed has downgraded its GDP growth forecast for 2025 to 1.4 percent, suggesting a somewhat downgraded economic outlook. On the company front, Tesla's stock soared over 8 percent after launching its driverless robotaxi service in Austin, Texas. Intel plans to lay off around 10,000 workers, or up to 20 percent of its global workforce, despite receiving federal funding. Microsoft and Meta Platforms both saw their stocks gain about 2 percent. Microsoft recently hit a fresh high, though it also plans to trim jobs, and Meta is launching AIpowered glasses this summer. Uber is expanding its AI solutions business, and Texas Instruments plans a huge 60 billion dollar investment in the US. On the flip side, Kroger plans to close 60 stores, and Hasbro is laying off 3 percent of its staff, partly due to tariffs. Aflac reported a cybercrime group accessed customer data, and we also heard that FedEx founder Fred Smith passed away at 80. So, why is the market behaving this way? The current positive stance, despite some mixed economic signals, seems to be a clear 'riskon' reaction to the perceived deescalation of Middle East tensions. Investors are breathing a sigh of relief, interpreting the recent conflict as contained, which is why oil prices plunged. This allows the market to refocus on corporate fundamentals. The Fed's consistent stance on interest rates also provides some certainty, and while inflation is sticky and GDP is down slightly, the labor market isn't collapsing, offering a stable foundation. Plus, strong companyspecific news, like Tesla's robotaxi launch, shows innovation can certainly drive individual stocks. Now for my recommendations. First, stay agile and monitor geopolitical developments closely. While the deescalation is good news, these situations can shift rapidly, so keep an eye on international news for any renewed tensions. Second, focus on quality and look for sectorspecific opportunities. In Consumer Discretionary and Technology, consider companies with strong innovation and resilient business models, especially those leveraging AI. However, be mindful of their potentially high valuations. For Energy, the sharp drop in oil prices suggests caution in the short term, as lower oil prices impact profitability. Third, with inflation still above target, consider investments that perform well in a 'sticky inflation' environment, like value stocks or companies with strong pricing power. Revisit your bond allocations, as yields are lower across the curve, which might signal a flight to safety or anticipation of future rate cuts. Fourth, diversification remains paramount. The economic signals are mixed, so spreading your investments across various sectors and asset classes is key to managing risk. And finally, always review companyspecific risks. News like Intel's layoffs or Kroger's store closures can significantly impact individual stock performance, regardless of the broader market trend. Understand why these things are happening and their longterm implications. The Fed is still taking a waitandsee approach, so avoid drastic portfolio changes based on shortterm speculation about rate cuts. That's all for today's Spy Trader. Thanks for tuning in, and happy investing!