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Market Pulse: Highs and Headwinds · The SPY Trader

• 0:00
  Hey there , Spy Traders !
• 0:02
  It's Money Mike , your friendly neighborhood financial guru , here to kickstart your day with the latest market scoop .
• 0:09
  It's 6 am on Thursday , June 26th , 2025 , Pacific time , and we've got a lot to unpack .
• 0:16
  The US stock market is showing a mixed but generally positive performance , with major indices still near alltime highs , driven by a resilient economy and anticipation of a gradual easing cycle from the Federal Reserve .
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  However , underlying concerns like inflation pressures from tariffs and moderating growth are definitely tempering the outlook .
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  Let's dive into the key news items .
• 0:41
  As of today , the S&P 500 is up by about 0.96% , trading around 6,025 , and it's climbed over 11% in the last year , hovering near its alltime high from February .
• 0:57
  The Dow Jones Industrial Average is up by 0.89% today , sitting at 42,581 , and it's seen a solid 9% increase over the year .
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  The techheavy Nasdaq Composite has gained 0.94% today , reaching 19,630 , also near record highs , with the NASDAQ 100 up over 15% yeartodate .
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  The market's seen a significant rebound since a steep drop back in March and April when tariff policy announcements had the S&P 500 flirting with a bear market .
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  Now , for sector performance , Technology and Communication Services are leading the pack .
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  Information Technology is up 7.49% yeartodate , and Communication Services is up 8.12% yeartodate .
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  Large companies like Nvidia and AMD are big contributors here .
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  Industrials are also showing strong yeartodate performance , up 9.50% , and Financials are up 6.60% .
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  On the flip side , Utilities and Real Estate are currently lagging , with Real Estate down 2.45% daily and Utilities down 1.34% daily .
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  Consumer Discretionary is down 3.78% yeartodate , Healthcare is down 2.70% , and Energy is down 2.47%.In recent news , a fragile ceasefire between Israel and Iran has provided some market support , helping deescalate tensions .
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  However , the impact of President Trump's new tariffs is a significant theme .
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  While so far , tariffs have had a limited impact on overall inflation , analysts expect upward pressure on goods prices in the second half of 2025 as pretariff inventories deplete .
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  The average effective tariff rate is around 15% , the highest since 1936 .
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  On the economic data front , weekly jobless claims held steady .
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  And we're keeping an eye out for upcoming earnings reports from major companies like Walgreens and Nike .
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  Diving into macroeconomic conditions , the Federal Reserve has held interest rates steady at 4.25% to 4.5% for the fourth consecutive meeting , adopting a ' waitandsee ' approach .
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  While the decision was unanimous , there's a growing divide within the Fed , with some officials anticipating no rate cuts this year , while others still expect two .
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  The Fed is described as being in a ' gradual easing cycle , ' similar to 1995 .
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  Inflationwise , the annual CPI for May 2025 increased to 2.4% from 2.3% in April , marking the first acceleration in four months .
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  Core inflation remained at 2.8% in April .
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  Forecasts suggest inflation could rise noticeably from the third quarter of 2025 , potentially exceeding 3% yearonyear , primarily due to tariff impacts .
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  For GDP growth , the US economy contracted by 0.2% in the first quarter of 2025 , the first contraction in three years , partly due to a surge in imports in anticipation of higher tariffs .
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  However , the economy is poised for a strong rebound in the second quarter , with the Atlanta Fed's realtime GDP estimate pointing to 3.4% growth .
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  The Fed expects real GDP growth to slow to 1.4% for the full year 2025 .
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  Employment remains relatively stable , with total nonfarm payroll employment increasing by 139,000 in May , and the unemployment rate unchanged at 4.2% .
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  And yes , the US national debt is climbing rapidly , on track to double over the next three decades , which raises longterm fiscal concerns .
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  Let's talk about some company events .
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  Nvidia has resecured its position as the world's most valuable company .
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  Its shares hit fivemonth highs and are nearing record closes , with anticipation building around its shareholder meeting today and continued strong demand fueled by AI .
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  Advanced Micro Devices , or AMD , shares are also showing gains , contributing to the strong performance in the technology and semiconductor sectors .
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  Super Micro Computer , or SMCI , has seen significant price increases .
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  Analysts suggest Micron is gaining market share in AI .
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  Wedbush raised its price target on Microsoft , citing AI's potential to transform its cloud growth trajectory .
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  AT&T recently settled data breach lawsuits for 177 million dollars .
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  Stellantis NV shares rose after an upgrade from Jefferies , with data suggesting an earnings turnaround .
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  And Circle Internet Group saw a rise after a significant plummet , possibly indicating profittaking after a fierce rally postIPO.Now , for my analysis and insights .
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  The current state of the US stock market reflects a delicate balance of bullish momentum and looming uncertainties .
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  The strong performance of the S&P 500 , Dow , and Nasdaq , particularly the tech sector , is largely attributable to continued excitement around Artificial Intelligence and the robust earnings potential of companies like Nvidia , AMD , and Microsoft .
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  This AIdriven rally is a significant tailwind for the market , pulling up overall index performance .
• 6:48
  Macroeconomic conditions present a more nuanced picture .
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  The Federal Reserve's decision to hold interest rates steady signals a patient approach , allowing the economy to absorb previous tightening measures .
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  The expectation of a ' gradual easing cycle ' is generally positive for equities , as lower rates can reduce borrowing costs for companies and make stocks more attractive compared to bonds .
• 7:14
  However , the internal division within the Fed regarding future rate cuts highlights uncertainty and could lead to market volatility if expectations shift .
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  The GDP data shows a mixed trend : a contraction in Q1 2025 followed by a projected rebound in Q2 .
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  This indicates some underlying resilience , but the Q1 contraction , partly due to tariffinduced import surges , suggests vulnerabilities to trade policy .
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  The rising national debt is a longterm concern that could eventually impact investor confidence and fiscal policy flexibility .
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  Inflation , while currently moderate , is expected to face upward pressure in the second half of 2025 due to tariffs .
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  This could force the Fed to maintain higher rates for longer or even reconsider its easing path , potentially dampening market enthusiasm .
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  The employment picture remains solid with a low unemployment rate , which supports consumer spending , a key driver of the economy .
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  Sector performance underscores the market's current focus .
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  The outperformance of technology and communication services reflects their growth potential and resilience , particularly in the AI narrative .
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  The lagging performance of real estate and utilities , despite stable bond yields , could be due to specific sector headwinds such as new home sales missing consensus , indicating softness in the housing market , or simply profittaking after previous strong runs .
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  Overall , the market is navigating a period of economic resilience balanced against inflationary pressures from tariffs and geopolitical risks .
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  The ' waitandsee ' approach from the Fed and the market's reliance on a few largecap tech companies for gains highlight the current dynamics .
• 9:09
  Alright , let's get to some concrete recommendations for your portfolio .
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  First , I'd say maintain diversification but with a tilt towards growth .
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  While technology and AIrelated stocks are performing strongly , relying solely on them can increase risk .
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  A diversified portfolio with exposure to resilient sectors can mitigate potential downturns .
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  However , the strong tailwinds from AI suggest continued , albeit perhaps choppier , growth in this area .
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  So , continue to hold exposure to strong Information Technology and Communication Services companies , particularly those with clear AI integration and growth strategies , like cloud computing or semiconductor leaders .
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  Balance this with exposure to Industrials and potentially Financials , which are showing solid yeartodate gains and can benefit from a moderately growing economy .
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  Second , monitor inflation and Federal Reserve communications closely .
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  Expected tariffdriven inflation in the second half of 2025 could influence the Fed's monetary policy path .
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  Any deviation from the anticipated ' gradual easing ' could trigger market corrections .
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  Pay close attention to upcoming inflation reports , especially PCE , the Fed's preferred gauge , and any statements from Fed officials .
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  Consider inflationprotected securities , or TIPS , if inflation shows signs of becoming persistent or significantly higher than forecasts .
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  Third , evaluate your exposure to ratesensitive sectors carefully .
• 10:48
  While the Fed is holding rates steady for now , the ' higher for longer ' narrative for interest rates could persist if inflation proves stubborn .
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  This environment generally impacts interestrate sensitive sectors like Real Estate and Utilities .
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  If you have significant exposure to Real Estate or Utilities , review their specific company fundamentals and consider if their valuations fully account for the potential for prolonged higher rates or sectorspecific headwinds , like that soft housing data we're seeing .
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  Look for companies with strong balance sheets and consistent cash flows .
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  Fourth , stay informed on geopolitical developments and trade policy .
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  Geopolitical risks , though currently having limited and manageable effects , can escalate rapidly and introduce significant market volatility .
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  Tariff policies are a direct and ongoing influence on inflation and corporate costs .
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  Keep an eye on international relations and any new developments or shifts in trade policies , as these can quickly alter market sentiment and corporate profitability .
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  Fifth , focus on companies with strong fundamentals and pricing power .
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  In an environment where inflation might pick up due to tariffs , companies with strong brand recognition , essential products or services , or costcutting abilities , meaning pricing power , are better positioned to pass on increased costs to consumers without significantly impacting demand .
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  Prioritize companies with a history of consistent earnings growth , healthy profit margins , and a competitive advantage .
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  Look into earnings reports of individual companies like Walgreens and Nike as they are released to assess their performance amidst current conditions .
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  And finally , consider active management or diversified ETFs .
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  The market's gains are increasingly concentrated in a few largecap tech companies .
• 12:48
  An equalweight S&P 500 index has actually underperformed the marketcap weighted index , suggesting a narrower market breadth .
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  For investors seeking broader exposure , consider actively managed funds or diversified exchangetraded funds , or ETFs , that spread investments across various sectors and market capitalizations , rather than relying solely on heavily weighted index funds .
• 13:15
  By adopting a balanced and informed approach , investors can navigate the current US stock market , which presents both opportunities driven by technological innovation and challenges posed by macroeconomic uncertainties .
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  That's it for today , Spy Traders .
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  Money Mike signing off , happy trading !