Dip-Buyers Defend the Tape, but the Real Test Is Still Ahead

Today's late-session technical updraft wiped out an ugly 1% slide in the S&P 500, as the dip-buying militia stormed back into the tape ahead of a full-blown gauntlet — tech earnings, key macro drops, and a slow-burn thaw in U.S.–China trade tensions.

We’re barreling headfirst into the meat grinder of tech earnings season — and the tape’s throwing off fair to sound signals. The Nasdaq ripped 6.5% last week and is up another 1% for the month, fueled by a combination of earnings beats, a VIX pinned in the mid-20s, 10-year yields grinding back toward 4.20%, and tech allocations still at multi-year lows.

The multi-year low positioning and the risk-reward setup had been screaming "maximum pessimism" — but early movers like SAP, ServiceNow, Netflix, Google, and TSMC blew right through lowball estimates, proving that innovation isn’t hostage to tariffs and that investor fears were way too front-loaded.

Software and semis are doing most of the heavy lifting, with GenAI names straight-up torching their benchmarks. But let's not kid ourselves — last week's sunshine isn’t a clean bill of health. Beats are getting underpaid, and misses are getting smoked. The whippy nature of today’s price action is a tell: we’re getting close to the point where the Street feels it’s front-running the "good news" trade too far, too fast.

Even if Apple, Amazon, Microsoft, and Meta drop clean numbers, the deeper question looms: can earnings hold up once we move past the megacap sugar rush? Especially when hard data, not just trade talk headlines, starts hitting the tape, not to mention when you layer in the China-US trade war , uncertainty, which is starting to show up at US ports

Wild swings from the April 2 “Liberation Day” tariffs have cooled a bit, but investors will be tearing through this week’s earnings to sniff out any cracks from U.S. trade policies. Four of the Magnificent 7 — Microsoft, Apple, Meta, and Amazon — step up to the mic this week, and with $20 trillion of S&P market cap reporting, it’s the heaviest earnings week of the year. Expectations? Still holding up — analysts see ~15% profit growth for the Mag7 in 2025, barely budged since March despite the trade war flare-up. Resilient for now, but there’s a lot riding on the fine print.

Meanwhile, even a modest thaw in U.S.–China rhetoric has markets leaning a little less defensive. Tariff tea leaves look marginally better, earnings estimates aren’t flashing collapse, and — critically — the Fed put feels alive again heading into Friday’s NFP.

And that’s the real kicker: fresh U.S. macro data is coming in heavy this week, and FX traders are already repositioning for the triggers. The path for FX isn’t tariff noise anymore — it's hard data. If Friday’s NFP print comes soft, it’s game on: deeper Fed cuts get priced, the dollar caves, and risk assets catch a second wind.

Consensus is circling the same camp we’ve been pounding for weeks: the hard data has to “catch down” to the soft survey noise eventually. Government layoffs are outpacing private hires, job openings are starting to roll, and if NFP flinches — especially a sub-100k print — it’s a full-blown kill shot for the dollar.

In summary, stocks chopped around Monday, with early risk-on hopes quickly unwinding into a tech-led selloff after Huawei’s AI chip ambitions took another bite out of Nvidia (NVDA). The Dallas Fed manufacturing survey came in ugly( -35.8 in April from -16.3, the lowest reading since May 2020) — a real shocker — adding fuel to the downside and punching broader risk sentiment lower.

But just as E-mini S&P 500 futures knifed down and flirted with a convincing break below 5,500, the tape pulled a hard reversal into the close. No real news to pin it on — just classic technical-driven flow after a failed break at a big round number. Buyers stepped in hard to defend the level, snapping the market back on thin liquidity.

In FX, the yen received a safe-haven bid amid the intraday chop, while crude was hit with the broader risk-off tone before bouncing modestly off its lows. The downside in oil was cushioned by a weaker dollar backdrop and Energy Secretary Wright’s comments that the U.S. is actively refilling the Strategic Petroleum Reserve (SPR). Some brief volatility also sparked earlier reports of tensions between India and Pakistan.

On the trade front, Treasury Secretary Bessent kept the fire stoked, flagging that the first bespoke trade deal could land as early as this week or next. He emphasized that the U.S. is cutting individual deals with 18 trading partners, while admitting China’s case is "more complicated." Bessent hinted that Beijing’s tariff exemptions show they want a de-escalation — but made it clear he’s got an "escalation ladder" ready if talks sour.

Bottom line: risk feels fragile, buyers are defending key technicals, but the real catalysts — NFP, Fed cut odds, and tangible trade breakthroughs — are still lurking just ahead.

The View

After one of the most brutal snap-backs since the 1950s—courtesy of a 14% plunge pared to just a 1.5% MTD drop—I’ve flipped my tactical stance from bearish to bullish in under two months. This isn’t a fundamental turn; it’s pure technical. Light positioning, thin liquidity and muted participation leave the market primed to drift higher unless a fresh tariff shock or a bond-yield spike derails the party.

Mega-cap tech earnings remain the rocket fuel. As Apple, Amazon, Microsoft and Meta line up to report, any beat will likely reinforce the rally, even if the bar is already front-run. At the same time, whispers of a trade-deal MoU continue to skew risk/reward positively. Put it all together and the pain trade is still higher—led by a narrow cohort of stocks, just like the Mag7 run in H1 2024.

That said, don’t mistake the technical lift for an all-clear on the economy. We’re still 1–2 months away from feeling the recessionary lagged impact of trade tensions on real-world growth. Early signs of throttled Chinese shipments point to potential summer goods shortages—empty shelves and surging e-commerce prices could finally crimp consumption and usher in a recessionary swoon.

Until then, the macro data might hold up . Friday’s NFP will be the next litmus test, and there’s every chance consumption continues surprising to the upside. But hard data will eventually catch down to soft surveys—a recent Fed study confirms sentiment is down while spending is running above 2019 levels. Measure actual flows, not just the gloom-and-doom headlines.

Keep an eye on the S&P: another 1.5% rally and we’ll notch the first recovery of a 10%+ MTD drop since 1950. That alone tells you how technical this move is—ride it, but respect the risks, and month-end rebalancing might have something to say.

Finally, the Fed finds that consumption has increased despite the significant decline in sentiment.