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Market’s Rate Cut Revival · The SPY Trader

• 0:00
  Hello , market adventurers !
• 0:02
  This is Buck Bouncer , your guide through the financial jungle , and you're tuned into the Spy Trader podcast .
• 0:09
  It's 12 pm on Thursday , June 26th , 2025 , Pacific time , and we've got a lot to unpack from today's market action .
• 0:18
  The US stock market is showing some pretty positive vibes today , with the major indices marching higher .
• 0:25
  The S&P 500 Index is up a solid 1.11% , hitting 6,092.18 and eyeing that alltime high of 6,144 from February .
• 0:38
  The Dow Jones Industrial Average has gained 1.19% to 43,089.02 , and the Nasdaq 100 is up 0.98% at 19,637.60 , having recently set its own new high .
• 0:56
  However , let's remember that yesterday , market breadth was a bit narrower , with the S&P 500 equalweight index actually falling 0.7% even as the broader S&P 500 stayed flat .
• 1:09
  When we look at sectors today , most are in the green , which is great to see .
• 1:14
  The Materials sector is leading the pack , up 1.12% , closely followed by Energy , gaining 1.22% .
• 1:24
  Real estate is the outlier , currently down 0.88% .
• 1:29
  Technology , especially chip stocks , continues to be a big story , fueled by strong earnings .
• 1:35
  Interestingly , over the past year , the Industrials sector has quietly outpaced Technology , rising over 18% compared to Tech's 7% , showing a broader market strength beyond just the big tech names .
• 1:48
  Consumer Discretionary , on the other hand , is still down 3.14% yeartodate .
• 1:55
  Now for some of the key news items moving the markets .
• 1:58
  Earnings season is always a big driver , and Micron Technology delivered strong results and an upbeat outlook , which significantly boosted chip stocks and reinforced that ongoing Artificial Intelligence trend , with their data center revenue more than doubling .
• 2:14
  Worthington Steel also saw a sharp increase after beating its earnings estimates .
• 2:20
  We're keeping an eye on Nike , which is scheduled to report earnings after the market closes today .
• 2:26
  However , not all tech news was rosy , as Apple's stock slipped a bit after a price target downgrade by JPMorgan Chase .
• 2:34
  On the political front , there's some interesting speculation brewing .
• 2:38
  Reports suggest that former President Trump might name his nominee for the next Federal Reserve Chair early , potentially aiming for someone who could advocate for a more dovish monetary policy and earlier interest rate cuts .
• 2:52
  This speculation is certainly adding to the market's optimism .
• 2:56
  Geopolitical tensions have also seen some welcome deescalation , with a ceasefire agreement between Israel and Iran contributing to a calmer market environment .
• 3:06
  However , investors are also keeping a watchful eye on some upcoming deadlines : the July 4 budget deadline and the July 9 tariff deadline , which could introduce new uncertainties .
• 3:19
  Let's dive into the economic picture , which is quite a mixed bag and really feeds into the interest rate cut narrative .
• 3:26
  The final government estimate for firstquarter 2025 Gross Domestic Product , or GDP , showed an unexpected contraction of 0.5% on an annualized basis .
• 3:39
  This was revised down from an earlier estimate of minus 0.2% and is a stark contrast to the 2.4% growth we saw in the fourth quarter of 2024 .
• 3:50
  This weakness was partly attributed to heavy imports ahead of tariffs .
• 3:55
  On the labor front , weekly initial jobless claims actually fell to 236,000 , which was below expectations .
• 4:04
  But here's the catch : continuing claims rose to a new threeyear high of 1.974 million .
• 4:11
  This suggests that while fewer people are filing initial claims , it's becoming harder for those who are unemployed to find new jobs , which indicates some underlying weakening in the labor market .
• 4:24
  In contrast , May's durable goods orders saw a surprising jump of 16.4% , with the more closely watched core number rising 1.7% , a sharp rebound from April's 1.5% decline .
• 4:38
  When it comes to inflation and interest rates , the inflation rate in May was reported at 2.4% , slightly up from April's 2.3% .
• 4:48
  The current interest rate stands at 4.5% .
• 4:52
  We've seen Treasury yields tick down 3 to 4 basis points today .
• 4:57
  Market participants are increasingly betting on Federal Reserve rate cuts , with nearly a 90% chance of at least one cut by September , and futures pricing in two to three cuts by yearend .
• 5:09
  Finally , the Conference Board Leading Economic Index for the US declined by 0.1% in May 2025 , after a 1.4% decline in April .
• 5:21
  The sixmonth growth rate of the LEI has become more negative , triggering what they call a recession signal , although The Conference Board itself doesn't anticipate a full recession , but rather a significant slowdown in economic growth for 2025.So , here's my take , folks .
• 5:39
  The market's current uplift seems primarily driven by that optimism around potential Fed rate cuts and some genuinely strong individual company performances , especially in the technology sector .
• 5:52
  The recent downward revision of Q1 GDP and that rise in continuing jobless claims suggest a softening economy .
• 6:01
  This paradoxically fuels hopes for earlier rate cuts , as the Fed might feel more compelled to stimulate growth .
• 6:09
  The strength we're seeing in sectors like Materials and Energy could be a reaction to commodity prices , with copper and Brent crude seeing slight increases .
• 6:19
  However , that negative breadth we saw yesterday , where the equalweight S&P 500 underperformed its marketcapweighted counterpart , indicates that the rally is still pretty concentrated in a few largecap stocks rather than being a broadbased market enthusiasm .
• 6:36
  And let's not forget those looming tariff deadlines ; they could certainly introduce some volatility if trade tensions reescalate , even with the current deescalation of Middle East fears .
• 6:49
  Alright , let's talk about what this means for your portfolio .
• 6:52
  Given these market dynamics , here are a few considerations to keep in mind .
• 6:57
  First , you absolutely need to monitor Fed commentary and all upcoming economic data closely .
• 7:04
  The prospect of interest rate cuts is a huge driver right now .
• 7:08
  Any further indications from Fed officials or significant shifts in data , like the PCE inflation report coming out tomorrow , could heavily influence market direction .
• 7:19
  Be prepared for some volatility around those announcements .
• 7:23
  Second , evaluate your portfolio's breadth .
• 7:26
  The fact that the S&P 500 Equal Weight Index is lagging suggests that market gains are still concentrated in just a few largecap stocks .
• 7:36
  So , consider diversifying your portfolio beyond just these top performers to ensure broader market exposure and potentially reduce concentration risk .
• 7:45
  Third , consider sectors with strong tailwinds .
• 7:50
  Technology , especially anything related to AI , continues to show strong performance , as evidenced by Micron .
• 7:58
  Continued innovation and demand for AI infrastructure could keep this sector robust .
• 8:03
  Industrials have shown impressive performance over the past year , even outpacing tech .
• 8:09
  Look for companies with strong backlogs and exposure to reshoring or infrastructure spending .
• 8:16
  And given today's strong performance and the potential for commodity price appreciation , Materials and Energy might offer opportunities , but remember , energy prices can be quite volatile .
• 8:28
  Fourth , exercise caution in cyclical consumer sectors .
• 8:32
  The Consumer Discretionary sector is down yeartodate , and the downward revision in Q1 GDP , partly due to lower consumer spending , suggests a cautious approach .
• 8:45
  While a rebound is expected in Q2 , closely monitor consumer confidence and spending patterns .
• 8:51
  Fifth , always assess the risk from geopolitical and trade issues .
• 8:56
  While Middle East tensions have eased , those upcoming tariff deadlines are still a concern .
• 9:01
  Companies with significant international exposure or those reliant on complex global supply chains could be vulnerable to renewed trade frictions .
• 9:11
  Sixth , focus on companies with strong fundamentals .
• 9:15
  In a mixed economic environment like this , companies with solid balance sheets , consistent earnings , and competitive advantages are always better positioned to weather any potential downturns .
• 9:27
  The recent positive earnings from Micron and Worthington Steel really highlight the importance of companyspecific performance .
• 9:34
  And finally , maintain a longterm perspective .
• 9:38
  Despite shortterm fluctuations and mixed signals , the S&P 500 is still nearing alltime highs .
• 9:46
  For longterm investors , maintaining a diversified portfolio aligned with your personal risk tolerance remains crucial , rather than reacting to every daily market swing .
• 9:58
  That's all for this edition of Spy Trader !
• 10:01
  Until next time , stay smart and keep those investments humming !