Market Check: Pullbacks and Policy

Fresh news and strategies for traders. SPY Trader episode #1291. Hey everyone, welcome back to Spy Trader! It's Wally Street here, and it's 12 PM on Monday, July 7th, 2025, Pacific time. Let's dive into what's moving the markets today. We're seeing a bit of a pullback after some impressive alltime highs last week. The S&P 500 is down 0.4%, the Nasdaq dropped 0.7%, and the Dow Jones Industrial Average lost nearly 80 points. The US500, in particular, fell 0.75% from its last session, hitting 6232 points. However, zoom out a bit, and the S&P 500 is still up almost 4% over the past month and over 11% compared to this time last year. As for sectors, consumer discretionary is having a tough day, while real estate is managing to stay in the green. Last week, we saw growthoriented sectors like communication services and cyclicals like energy and industrials leading the charge, but earlier in the month, communication and tech lagged. Now, let's hit the headlines. President Trump announced that the US plans to unveil new trade deals and send formal notifications about new tariff levels, with reciprocal tariffs set to take effect on August 1st. He also warned that any country aligning with the 'antiAmerican policies' of the BRICS bloc could face an additional 10% tariff. Big news on the company front: Tesla shares tumbled more than 7% after Elon Musk announced plans to launch a new political party, raising investor concerns about the brand. On the energy side, OPEC members have again agreed to raise oil output levels. And a definite winner today is Datadog, DDOG, whose shares soared 15% in the last session on news of its inclusion in the S&P 500 later this week. Looking at the broader economic picture, higher interest rates continue to be a factor, and expectations for Fed rate cuts have declined after a strong Nonfarm Payrolls report. Inflation, as measured by the CPI, was up 2.4% yearoveryear in May, with core CPI at 2.8%, still above the Fed's target, and some economists expect tariffs to cause a slight pickup in 2025. GDP data showed a contraction of 0.3% in Q1 2025, and while a recession isn't anticipated, a significant slowdown is expected due to tariffs and interest rates. On the employment front, the economy added 147,000 new jobs in June, beating expectations, and the unemployment rate slipped to 4.1%. Consumer spending is key, and higher tariffs and elevated interest rates could negatively affect durable goods spending this year and next. Major US banks are also gearing up to kick off earnings season in midJuly. So, what does all this mean for your portfolio? While I'm just Wally Street, and this isn't financial advice, here are some things to consider in this dynamic market. First, stay informed on trade policy. Those new tariffs and ongoing negotiations could really shake things up for companies with global exposure. Keep an eye on which sectors might be hit or helped. Second, assess sector strength and weakness. With consumer discretionary struggling but real estate holding its own, a targeted approach makes sense. Defensive sectors like utilities and consumer staples often fare well in slower growth periods, and cyclicals like energy and industrials have shown recent strength. Balance your growth and value plays. Third, focus on company fundamentals and diversification. In times of uncertainty, strong balance sheets and consistent earnings are your friends. Do your homework on individual stocks, especially with earnings season coming up, and remember to diversify your portfolio across different sectors and asset classes. Fourth, monitor macroeconomic indicators. Keep a close eye on inflation reports, GDP data, employment numbers, and especially any word from the Federal Reserve about interest rates. These are vital clues to the market's direction. And finally, consider the longterm perspective. Shortterm bumps are normal. Don't make impulsive decisions based on daily swings. Stick to your longterm goals and adjust your strategy periodically. That's it for this edition of Spy Trader. Wishing you profitable trading, and I'll catch you next time!