From Wall Street to Main Street
Highlights from the past week
Market / Macro Economic Summary Markets forged a strong rally last week as President Trump settled fears over the rumors of him “firing Fed Chair Jerome Powell” and also announced progress on the tariff front as announcements of agreements should come in the next 3-4 weeks. Last week we saw the Nasdaq climb 6.7%, the S&P rise 4.6% and the Dow Jones nudge 2.5% higher. Since mid-April, we've seen a bit of a bounce-back in the stock market following a pause in tariff increases. This rally has brought the S&P 500 up about 10% from its recent low, though we're still roughly 10% away from the high we saw back in February. We're now in a sort of wait-and-see zone. Historically, after significant market drops like the one we experienced earlier this year, it usually takes some time for things to settle down before we see things trend upward again. Markets often test their lows before truly recovering. While we've seen rapid recoveries before (like in 2018 and 2020), those were often supported by strong actions from the Federal Reserve and government stimulus. This time around, the Fed has less room to maneuver due to ongoing inflation, and government budgets are tight. Looking ahead, trade developments and any shift towards policies that encourage economic growth will be key. The market might remain in a somewhat sideways pattern for a while, with periods of ups and downs, before potentially trending back towards the levels we saw earlier this year. Earnings in Focus Amidst Tariffs We're currently in the heart of earnings season, with many major companies reporting their results. So far, the news has been generally positive, with a high percentage of companies exceeding expectations. However, these reports likely don't yet reflect the full impact of any trade-related challenges. Therefore, we're paying close attention to what companies are saying about their outlook for the rest of the year. Some companies that sell directly to consumers are starting to mention a potential slowdown in spending due to economic uncertainty, and some are even holding back on their financial forecasts for the year. As a result, overall profit growth expectations for the year have come down somewhat. We believe that mid-single-digit profit growth is still achievable if the economy avoids a more serious downturn. Considering the trade uncertainties and the strong market returns of the past couple of years, a year where stock valuations might decline slightly but are partially offset by rising company profits could still be a reasonable outcome. Company Specific / Micro Economic Summary Tesla (TSLA) Share were up 5% on what can be best described as a quarter that wasn’t “as bad” as investors had expected. The electric vehicle maker reported lackluster first-quarter results, which included a 20% year-over-year drop in automotive revenue and a 71% decline in net income. Tesla also said it would “revisit” 2025 guidance when it provides a second-quarter update. Top- and bottom-line figures also fell short of estimates, with the company posting adjusted earnings of 27 cents per share on revenue of $19.34 billion. Analysts projected adjusted earnings per share of 39 cents on $21.11 billion in revenue. One highlight was CEO Elon Musk saying that, starting May 1, his time at DOGE will be limited and he expects unsupervised, fully self-drive rides to begin in June in Austin, TX. Boeing (BA) Shares of the airline manufacturer jumped 5.8% on a mixed quarter. Earnings per share came in at a loss of $0.49 when analysts had expected a loss of $1.29. Revenues, however, came in at $19.5 billion while expectations had been closer to $19.8 billion. CEO Kelly Ortberg said the plane maker could send some aircraft destined for China to other airlines amid the trade war. Service Now (NOW) Shares jumped 14% as the company reported a top and bottom-line beat. Earnings per share of $4.04 were much better than the estimates of $3.83. Revenue of $3.09 billion slightly beat the calls for $3.08 billion. “Service Now’s position as the platinum standard for enterprise-grade AI drove these outstanding first quarter results,” said ServiceNow Chairman and CEO Bill McDermott. “Our platform is delivering real business transformation to empower CEOs with speed and agility to lead through this fast-changing environment. Service Now is meeting the moment, driving immediate value creation for customers and shareholders.” International Business Machines (IBM) Shares fell as the company managed to weather the tariff storm. Year to date, the stock had gained 10% despite the Nasdaq’s drop. CEO Arvind Krishna reported adjusted earnings per share of $1.60, which exceeded analysts' expectations of $1.40. The company also saw its revenue come in slightly above forecasts, reaching $14.54 billion compared to the anticipated $14.4 billion. The main problem was the announcement that the U.S. Department of Governmental Efficiency had delayed or nixed 15 federal contracts. Google (GOOG) Shares were up 2% as the internet giant reported a strong quarter. On the top line, revenues of $90.2 billion were much better than the calls for $89.2 billion. Earnings per share of $2.81 blew the Wall Street estimates of $2.01 out of the water. Sundar Pichai, CEO, said “We’re pleased with our strong Q1 results, which reflect healthy growth and momentum across the business. Underpinning this growth is our unique full stack approach to AI. This quarter was super exciting as we rolled out Gemini 2.5, our most intelligent AI model, which is achieving breakthroughs in performance and is an extraordinary foundation for our future innovation.” Parting Thoughts We welcome an opportunity to discuss the above detail and wish you much success in the rest of your week! Regards, Erick J. Palacios, MBA Wealth/Fiduciary AdvisorPlan to Prosper Wealth Management’s clients & employees will from time-to-time hold securities mentioned above. Commentary is not endorsements or recommendations of any securities.